Justia White Collar Crime Opinion Summaries

Austin Ray was convicted by jury convictions for one count of conspiracy to defraud the United States, five counts of aiding in the preparation of a false tax return, and two counts of submitting a false tax return. Ray argued on appeal: (1) the government violated the Interstate Agreement on Detainers Act (IAD) of 1970; (2) the government engaged in vindictive prosecution; (3) the district court violated his rights under the Speedy Trial Act (STA) of 1974; (4) the government violated his due-process rights by destroying certain evidence; and (5) the district court constructively amended the indictment. The Tenth Circuit affirmed in all respects, finding: (1) the government never lodged a detainer against Ray, meaning the IAD didn’t apply; (2) Ray established neither actual nor presumptive vindictiveness; (3) Ray’s STA argument was waived for failing to raise it below; (4) the evidence at issue lacked any exculpatory value, and even if the evidence were potentially useful to Ray’s defense, the government didn’t destroy it in bad faith; and (5) the district court narrowed, rather than broadened, the charges against Ray. View "United States v. Ray" on Justia Law

Larson was involved with—and later convicted of crimes related to—the organization of fraudulent tax shelters. The IRS then required organizers/promoters to register tax shelters not later than the day of the first offering for sale, 26 U.S.C. 6111(a). Organizers/promoters who failed to register were subject to a penalty of the greater of one percent of the aggregate amount invested in the tax shelter, or $500. Eight years after the IRS notified Larson that he was under investigation, it informed him that it considered him an organizer with a duty to register and was subject to penalties of $160,232,0261 for failure to do so. The IRS Office of Appeals reduced the penalties to $67,661,349, stating that Larson would need to pay the remaining penalty and file a Claim for Refund if he wanted to contest the assessment. Larson paid $1,432,735 and filed his Refund Claim. The IRS rejected Larson’s claim for failure to pay the entire amount. Larson filed suit. The government moved to dismiss, arguing that because Larson had not paid the assessed penalties in full, the court lacked jurisdiction. The court agreed, concluding that application of the full-payment rule did not violate Larson’s due process rights. The Second Circuit affirmed, holding that the full‐payment rule applies to Larson’s section 6707 penalties and that his tax refund, due process, Administrative Procedure Act, and Eighth Amendment claims were properly dismissed. View "Larson v. United States" on Justia Law

In 2004-2009, the IRS investigated Marinello’s tax activities. In 2012, Marinello was indicted for violating 26 U.S.C. 7212(a) (the Omnibus Clause), which forbids “corruptly or by force or threats of force . . . obstruct[ing] or imped[ing], or endeavor[ing] to obstruct or impede, the due administration” of the Internal Revenue Code. The judge instructed the jury that it must find that Marinello “corruptly” engaged in at least one specified activity, but was not told that it needed to find that Marinello knew he was under investigation and intended corruptly to interfere with that investigation. The Second Circuit affirmed his conviction. The Supreme Court reversed. To convict a defendant under the Omnibus Clause, the government must prove the defendant was aware of a pending tax-related proceeding, such as a particular investigation or audit, or could reasonably foresee that such a proceeding would commence. The verbs “obstruct” and “impede” require an object. The object in 7212(a) is the “due administration of [the Tax Code],” referring to discrete targeted administrative acts rather than every conceivable task involved in the Tax Code’s administration. In context, the Omnibus Clause serves as a “catchall” for the obstructive conduct the subsection sets forth, not for every violation that interferes with routine administrative procedures. A broader reading could result in a lack of fair warning. Just because a taxpayer knows that the IRS will review her tax return annually does not transform every Tax Code violation into an obstruction charge. View "Marinello v. United States" on Justia Law

Wilson was the Director, Chairman of the Board, President, and CEO of Imperial, which acquired e-Bio, which ran a fraud scheme, "Alchemy." It involved purchasing biodiesel from a third party and reselling it as though it had been produced by e-Bio, to take advantage of government incentives for renewable-energy production without expending production costs. Wilson was convicted of 21 counts: fraud in connection with the purchase or sale of securities, 15 U.S.C. 78j(b) and 78ff; fraud in the offer or sale of securities, 15 U.S.C. 77q(a) and 77x, and 18 U.S.C. 2; material false statements in required SEC filings, 15 U.S.C. 78ff and 18 U.S.C. 2; wrongful certification of annual and quarterly reports by a corporate officer, 18 U.S.C. 1350(c)(1); material false statements by a corporate officer to an accountant, 15 U.S.C. 78m(b)(5) and 78ff, and 18 U.S.C. 2; and false statements to government investigators, of 18 U.S.C. 1001. The dcourt sentenced Wilson to 120 months’ imprisonment and to pay $16,468,769.73 in restitution. The Seventh Circuit affirmed. None of Wilson’s contentions reach the high threshold of showing that a reasonable jury could not have found him guilty. Viewed in the light most favorable to the prosecution, the evidence adequately supports the jury’s finding that Wilson knowingly and willfully made false statements to investors, regulators, an outside accountant, and government agents, and the reasonable inference that Wilson participated in “Alchemy.” View "United States v. Wilson" on Justia Law

Fadden earned over $100,000 per year but did not submit tax returns. After an audit, the IRS garnished his wages. Fadden filed for bankruptcy, triggering an automatic stay. Fadden claimed that he had no interest in any real property nor in any decedent’s life insurance policy or estate. Fadden actually knew that he would receive proceeds from the sale of his mother’s home (listed by the executor of her estate for $525,000) and would receive thousands of dollars as a beneficiary on his mother’s life insurance policies. A week later, Fadden mentioned his inheritance to a paralegal in the trustee’s office and asked to postpone his bankruptcy. When Fadden finally met with his bankruptcy trustee and an attorney, he confirmed that his schedules were accurate and denied receiving an inheritance. The Seventh Circuit affirmed his convictions under 18 U.S.C. 152(1) for concealing assets in bankruptcy; 18 U.S.C. 152(3) for making false declarations on his bankruptcy documents; and 18 U.S.C. 1001(a)(2) for making false statements during the investigation of his bankruptcy. Counts 1 and 2 required proof of intent to deceive. Fadden proposed a theory-of-defense instruction based on his assertion that his conduct was “sloppiness.” The Seventh Circuit upheld the use of pattern instructions, including 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.” View "United States v. Fadden" on Justia Law

El-Bey, a "Moorish national," created an EIN for the Trust, naming himself as the trustee and fiduciary. El-Bey filed six tax returns for the Trust, each seeking a $300,000 refund, signing each return, identifying himself as the fiduciary, and listing his date of birth as the date of trust creation. The IRS flagged these returns as frivolous and notified El-Bey that he would be assessed a $5,000 penalty per return if he failed to file a corrected return. El-Bey returned the letters to the IRS, including vouchers and tax forms bearing no relation to the returns. Based on the fourth and fifth tax returns, the IRS mailed two $300,000 refund checks, which El-Bey deposited, using the funds to purchase vehicles and to buy a house. After the sixth return, El-Bey was indicted on two counts of mail fraud, 18 U.S.C. 1341, and six counts of making false claims to the IRS, 18 U.S.C. 287. The district court allowed El-Bey to proceed pro se and appointed standby counsel over El-Bey’s objection. El-Bey advanced irrelevant arguments, interrupted the judge, and made it challenging to manage the trial. The court expressed frustration, but later instructed the jurors, who indicated that they could continue to be impartial. The Seventh Circuit remanded for a new trial. Statements by the court in the presence of the jury conveyed that El-Bey was guilty or dishonest and impaired El-Bey’s credibility in the eyes of the jury. View "United States v. El-Bey" on Justia Law

El-Bey, a "Moorish national," created an EIN for the Trust, naming himself as the trustee and fiduciary. El-Bey filed six tax returns for the Trust, each seeking a $300,000 refund, signing each return, identifying himself as the fiduciary, and listing his date of birth as the date of trust creation. The IRS flagged these returns as frivolous and notified El-Bey that he would be assessed a $5,000 penalty per return if he failed to file a corrected return. El-Bey returned the letters to the IRS, including vouchers and tax forms bearing no relation to the returns. Based on the fourth and fifth tax returns, the IRS mailed two $300,000 refund checks, which El-Bey deposited, using the funds to purchase vehicles and to buy a house. After the sixth return, El-Bey was indicted on two counts of mail fraud, 18 U.S.C. 1341, and six counts of making false claims to the IRS, 18 U.S.C. 287. The district court allowed El-Bey to proceed pro se and appointed standby counsel over El-Bey’s objection. El-Bey advanced irrelevant arguments, interrupted the judge, and made it challenging to manage the trial. The court expressed frustration, but later instructed the jurors, who indicated that they could continue to be impartial. The Seventh Circuit remanded for a new trial. Statements by the court in the presence of the jury conveyed that El-Bey was guilty or dishonest and impaired El-Bey’s credibility in the eyes of the jury. View "United States v. El-Bey" on Justia Law

Defendant Kathleen Stegman was convicted by a jury of two counts of evading her personal taxes for the tax years 2007 and 2008. Stegman was sentenced to a term of imprisonment of 51 months, to be followed by a three-year term of supervised release. The district court also ordered Stegman to pay a $100,000 fine, plus restitution in the amount of $68,733. Stegman established several limited liability corporations pertaining to a “medical aesthetics” business she owned, using these corporations to effectively launder client payments. As part of this process, Stegman would use the corporations to purchase money orders, typically in denominations of $500 or less, that she in turn used to purchase items for personal use. In 2007, Stegman purchased 162 money orders totaling $77,181.92. In 2008, she purchased 252 money orders totaling $121,869.99. And in 2009, she purchased 157 money orders totaling $73,697.31. Notably, Stegman reported zero cash income on her federal income tax returns during each of these years. At the conclusion of the evidence, the jury convicted Stegman of evading her personal taxes for the tax years 2007 and 2008 (Counts 4 and 5), as well as evading corporate taxes for the tax years 2008 and 2009 (Counts 1 and 2). The jury acquitted Stegman of evading corporate taxes for the tax year 2010 (Count 3). The jury also acquitted Stegman and Smith of the conspiracy charge (Count 6). Stegman moved for judgment of acquittal or, in the alternative, a new trial. The district court granted the motion as to the two counts that related to the evasion of corporate taxes (Counts 1 and 2), but denied the remainder of the motion. In doing so, the district court chose to acquit Stegman of the corporate tax evasion counts not due to a lack of “proof beyond a reasonable doubt that this corporation evaded taxes,” but rather because “the indictment itself was flawed in attributing the loss as due and owing by Ms. Stegman, when actually it was due and owing by the corporation.” Stegman raised five issues on appeal, four of which pertain to her convictions and one of which pertained to her sentence. Although several of these issues require extensive discussion due to their fact-intensive nature, the Tenth Circuit concluded that all of these issues lacked merit. View "United States v. Stegman" on Justia Law

DiCosola started a business that produced compact discs in novelty shapes, for use as promotional items. The business morphed into a full‐service printing business, reaching about $1 million in gross annual sales and employing up to 10 people, including DiCosola’s immigrant father, who invested his retirement savings. In 2005, DiCosola started a side business for producing music, which sapped cash from the printing business. DiCosola’s 2007 loan application was rejected. He reapplied in 2008, providing fabricated tax returns that inflated his income by hundreds of thousands of dollars. Citibank issued DeCosola a loan of $273,500. DiCosola similarly used fabricated tax returns to obtain loans from Amcore, for $450,000 and $300,000. In 2009, after a few payments, DiCosola defaulted on the loans. In 2009, DiCosola falsified IRS forms to claim a refund of $5.5 million. In 2012, DiCosola was indicted for bank fraud, 18 U.S.C. 1344; making false statements to a bank, 18 U.S.C. 1014; wire fraud affecting a financial institution, 18 U.S.C. 1343; filing false statements against the United States, 18 U.S.C. 287. DiCosola was found guilty, sentenced to 30 months’ imprisonment, and ordered to pay restitution of $822,088.00. The Seventh Circuit affirmed, rejecting challenges relating to the testimony of DiCosola’s accountant. View "United States v. DiCosola" on Justia Law

Unreliable corporate meeting minutes were properly excluded in tax fraud trial. Petrunak was the sole proprietor of Abyss, a fireworks business regulated by ATF. In 2001, ATF inspectors inspected Abyss and reported violations. An ALJ revoked Abyss’s explosives license. Abyss went out of business. Five years later, Petrunak mailed the inspectors IRS W-9 forms requesting identifying information and then sent them 1099s, alleging that Abyss had paid each of them $250,000. Because the inspector’s tax return did not include the fictional $250,000, the IRS audited her and informed her that she owed $101,114 in taxes; she spent significant time and energy unraveling the situation. Petrunak submitted those sham “payments” as business expenses; he reported a loss exceeding $500,000 in his personal taxes. Petrunak admitted to filing the forms and was charged with making and subscribing false and fraudulent IRS forms, 26 U.S.C. 7206(1). He sought to introduce corporate meeting minutes under the business records exception, claiming that the records would have demonstrated his state of mind in preparing the forms. The minutes included statements bemoaning that the IRS was not more helpful, and declarations that the ATF agents perjured themselves. The Seventh Circuit upheld exclusion of the records, noting that the records contained multiple instances of hearsay and had no indicia of reliability. View "United States v. Petrunak" on Justia Law