Justia White Collar Crime Opinion Summaries

Grimes, a former professor of engineering at Pennsylvania State University and the owner of three research companies, pled guilty to wire fraud, 18 U.S.C. 1343; false statements, 18 U.S.C. 1001; and money laundering, 18 U.S.C. 1957, based on his fraudulent conduct involving federal science grants. The plea agreement in indicated that his advisory sentencing range under the USSG would be 41 to 51 months and contained a waiver of Grimes’s direct and collateral appeal rights. Grimes and his attorney signed acknowledgements that they had read the agreement and that the plea was voluntary. During his plea colloquy, Grimes discussed the agreement with the judge and acknowledged that no one could guarantee how the court would sentence him. The district court sentenced Grimes to 41 months’ imprisonment, at the bottom of the Guidelines range of 41 to 51 months. The Third Circuit rejected Grimes’s argument that his appellate waiver was not knowing and voluntary because it contained a waiver of his right to collaterally challenge his guilty plea, conviction, or sentence that did not exempt Sixth Amendment ineffective assistance of counsel claims. Grimes claimed that he could not have knowingly and voluntarily agreed to waive his appellate rights because his trial counsel faced an inherent, actual conflict of interest in negotiating and advising him on the waiver. View "United States v. Grimes" on Justia Law

Ottaviano, believing himself not bound by U.S. tax law, marketed his views to others through his company, Mid-Atlantic, which offered financial products he claimed would help others avoid taxation and have the government pay their debts. Ottoviano made many representations about himself and the financial products. Customers paid Mid-Atlantic $3,500 each ($5,000 if purchased jointly) to participate. After a trial at which he represented himself, Ottaviano was convicted of conspiracy to defraud the U.S. under 18 U.S.C. 371, eight counts of mail and wire fraud under 18 U.S.C. 1341 and 1343, money laundering under 18 U.S.C. 1957, and two counts of tax evasion under 26 U.S.C. 51. The Third Circuit affirmed, noting overwhelming evidence of guilt and rejecting arguments that the district court denied him a fair trial in violation of his Fifth Amendment right to due process of law when it cross-examined him and violated his Sixth Amendment right to represent himself when it ordered him to leave the courtroom during a discussion about a letter he sent to the Treasury Secretary. View "United States v. Ottaviano" on Justia Law

Investigation of Rabbi Fish began when Dwek, charged with bank fraud, informed law enforcement that several New York and New Jersey rabbis were laundering money through tax-exempt Jewish charities called gemachs. In a sting operation, Dwek approached Fish about laundering the claimed proceeds of fraudulent schemes. The “proceeds” were actually provided by the government. Fish participated in 12 money laundering transactions involving more than $900,000. Dwek would deliver bank checks made out to gemachs and rabbis and would receive cash in exchange, less a commission of about 10 percent. Fish gave Dwek SIM cards for his cell phone and warned Dwek to sweep his car and phones for detection devices and to use code when speaking to associates. In recordings made by Dwek, Fish stated that he had several money laundering connections, knew how much cash certain individuals had available at specified times, had met the “main guy” running the network, and that the cash came from the diamond and jewelry business. Fish pled guilty to conspiracy to commit money laundering, 18 U.S.C. 1956(h). The parties agreed that Fish’s total offense level would be at least 21; the government reserved the right to argue for a two-level enhancement under U.S.S.G. 2S1.1(b)(3) for sophisticated money laundering. The district court applied the enhancement and sentenced Fish to 46 months. The Third Circuit affirmed. View "United States v. Fish" on Justia Law

The Criminal Justice Act, 18 U.S.C. 3006A(a), requires courts to furnish legal counsel to criminal defendants “financially unable to obtain adequate representation.” Konrad was appointed a federal defender based on information he provided in a financial disclosure affidavit. At sentencing, the district court found discrepancies between Konrad’s presentencing report and his financial disclosure and, after a hearing, found that Konrad had $70,463 in two individual retirement accounts so he was not financially unable to pay the cost of legal representation. Konrad had failed to disclose the value of his home , had significantly under-reported income, and had reported the value of the retirement accounts inaccurately. The court ordered Konrad to repay $6,000. The Third Circuit affirmed; individual retirement funds and jointly-held bank accounts can be available funds within the meaning of the Criminal Justice Act and the court acted within its discretion in ordering Konrad to repay the market value of his legal representation rather than the hourly rate paid to an attorney appointed under the Criminal Justice Act. View "United States v. Konrad" on Justia Law

Stinson’s scheme began in 2006 when he founded a fund, Life’s Good, with an alleged purpose to originate mortgage loans. Stinson advertised a “risk free” 16 percent annual return to investors with individual retirement accounts. He hired telemarketers to “cold call” potential investors and later produced a fraudulent prospectus and worked through investment advisors. Stinson did not use investors’ money to make mortgage loans, but diverted it to various personal business ventures that employed his family and friends without requiring them to work. In 2010, the SEC initiated a civil enforcement action. Stinson was charged with wire fraud, 18 U.S.C. 1343; mail fraud, 18 U.S.C. 1341; money laundering, 18 U.S.C. 1957; bank fraud, 18 U.S.C. 1344; filing false tax returns, 26 U.S.C. 7206(1); obstruction of justice, 18 U.S.C. 1505; and making false statements, 18 U.S.C. 1001. The SEC’s analysis showed that Life’s Good solicited $17.6 million from at least 262 investors and returned approximately $1.9 million. Many individuals lost retirement savings. Stinson entered an open guilty plea. The district court sentenced him to 400 months and ordered restitution of $14,051,246. The Third Circuit vacated, finding that the court erroneously applied U.S.S.G. 2B1.1(b)(15)(A), which increases the offense level by two points when “the defendant derived more than $1,000,000 in gross receipts from one or more financial institutions.” The enhancement applies only when financial institutions are the source of a defendant’s gross receipts. View "United States v. Stinson" on Justia Law

Kluger and Bauer were charged as conspirators in an insider-trading scheme in which Robinson was the third participant. The conspiracy spanned 17 years and was likely the longest such scheme in U.S. history. Kluger entered a guilty plea to conspiracy to commit securities fraud; securities fraud; conspiracy to commit money laundering; and obstruction of justice, 18 U.S.C. 371, 15 U.S.C. 78j(b) and 78ff(a); 18 U.S.C. 1956(h), 18 U.S.C. 1512(c)(2), and 18 U.S.C. 2. The plea agreement did not include a stipulation as to the guidelines sentencing range. The district court imposed a 60-month term on Count I and 144-month custodial terms on each other count, all to be served concurrently, thought to be the longest insider-trading sentence ever imposed. After a separate hearing on the same day, the court sentenced Bauer to a 60-month term on Count I and 108-month terms on each other count to be served concurrently. Robinson, who was the “middleman,” in the scheme, pled guilty to three counts and was sentenced to concurrent 27-month terms. Robinson’s sentence was far below his guidelines range of 70 to 87 months but the prosecution sought a downwards departure because Robinson was cooperating in its investigation and prosecution. The Third Circuit upheld Kluger’s sentence. View "United States v. Kluger" on Justia Law

The Securities and Exchange Commission (SEC) Office of Investigations (OIG) found that the SEC had received numerous substantive complaints since 1992 that raised significant concerns about Madoff’s hedge fund operations that should have led to a thorough investigation of the possibility that Madoff was operating a Ponzi scheme. The SEC conducted five examinations and investigations, but never took the steps necessary to determine whether Madoff was misrepresenting his trading. The OIG found that had these efforts been made, the SEC could have uncovered the Ponzi scheme. Madoff’s clients filed suit under the Federal Tort Claims Act, 28 U.S.C. 1346(b), 2671, to recover damages resulting from the SEC’s failure to uncover and terminate the scheme in a timely manner. The district court dismissed for lack of subject matter jurisdiction, finding that the claims were barred by the discretionary function exception to the FTCA. The Third Circuit affirmed, reasoning that SEC regulations afford examiners discretion regarding the timing, manner, and scope of investigations and that there is a strong presumption that the SEC’s conduct is susceptible to policy analysis. View "Baer v. United States" on Justia Law

Ciavarella and another state court judge, Conahan, received $2.8 million in three years from a commercial builder, Mericle, and an attorney and businessman, Powell, during the “Kids for Cash” scandal in Luzerne County, Pennsylvania . Ciavarella committed hundreds of juveniles to detention centers co-owned by Powell, including many who were not represented by counsel, without informing the juveniles or their families of his conflict of interest. The judges, aware that they were under investigation, met with Mericle and Powell to coordinate their stories in 2008. Powell was wearing a recording device, exposing the judges’ efforts to obstruct justice. The judges pled guilty to wire fraud and conspiracy in exchange for an agreed 87-month sentence. Noting that the stipulated sentences were significantly lower than the advisory Sentencing Guidelines for the offenses, the district court rejected the plea agreement; the judges withdrew their pleas. Ciavarella proceeded to trial, was convicted of racketeering, honest services mail fraud, money laundering conspiracy, filing false tax returns, and several other related crimes and was sentenced to 336 months’ imprisonment, restitution, forfeiture, and a special assessment. The Third Circuit remanded for modification of the special assessment for mail fraud, but otherwise affirmed, rejecting an argument that the trial judge was biased. View "United States v. Ciavarella" on Justia Law

Turner, the author of Tax Free!, instructed readers to escape income taxation by using common law trust organizations (colatos), and established FAR to assist in implementing colatos. In 1991, Turner enlisted Leveto, the owner of a veterinary clinic, as a FAR member. FAR created Center, a foreign colato, and appointed Leveto as the general manager and Turner as a consultant. Leveto “sold” his clinic to Center, which “hired” Leveto as its manager. Leveto continued to control the clinic, but stopped reporting its income. Center did not pay taxes because it distributed the income to other foreign colatos, which, Turner claimed, “transformed” it to untaxable foreign source income. Leveto began to market Tax Free! In 1995, the IRS began a criminal investigation. In 2001, Turner and Leveto were charged with conspiracy to defraud the IRS by concealing Leveto’s assets, 18 U.S.C. 371. Turner moved to exclude recorded conversations between Leveto and an undercover agent and foreign bank records seized from Leveto’s office and residence. The district court admitted the conversations, reasoning that they furthered an unindicted conspiracy to impede tax collection efforts, and held that the government properly authenticated the foreign bank documents. Turner was convicted, sentenced to 60 months’ imprisonment, and ordered to pay $408,043 in restitution, without any findings about his ability to pay. The Third Circuit affirmed. View "United States v. Turner" on Justia Law

Under the “Hyde Amendment,” a district court in criminal cases may award to a prevailing party a reasonable attorney’s fee and other litigation expenses, if the position of the United States was vexatious, frivolous, or in bad faith, unless the court finds special circumstances, 18 U.S.C. 3006A. The district court denied such an award in a case involving four counts of conspiring and attempting to commit extortion, 18 U.S.C. 951(a) & 2 (Hobbs Act), and two counts of traveling in interstate commerce to promote and facilitate bribery, 18 U.S.C. 1952(a)(3) & 2 (Travel Act). The government alleged that Manzo, a candidate for mayor of Jersey City, sought cash payments from Dwek, an informant posing as a developer, and that, in exchange, Manzo indicated he would help Dwek with matters involving Jersey City government. The district court dismissed each Hobbs Act count because Manzo was not a public official at the time of the conduct. The Third Circuit affirmed. The court later held that receipt of something of value by an unsuccessful candidate in exchange for a promise of future official conduct does not constitute bribery under the New Jersey bribery statute and dismissed all remaining charges. The Third Circuit affirmed the denial of fees. View "United States v. Manzo" on Justia Law