Justia White Collar Crime Opinion SummariesArticles Posted in U.S. 3rd Circuit Court of Appeals
United States v. Sussman
The Federal Trade Commission secured a judgment of $10,204,445 against Sussman and his co-defendants and equitable relief, based on abusive debt collection activities. Sussman subsequently entered a safe deposit box and removed coins that had been “frozen” in connection with the earlier action; he was then convicted of theft of government property, 18 U.S.C. 641, and obstruction of justice, 18 U.S.C. 1503(a) and sentenced to 41 months on each count, to be served concurrently, followed by three years of supervised release. The court also imposed a $15,000 fine and a $200 special assessment. The Third Circuit affirmed, rejecting a challenge to the sufficiency of the evidence and a clam that Sussman should be afforded a new trial because a portion of the trial transcript is unavailable, apparently because a court reporter lost the transcript. The court upheld the admission into evidence of redacted documents from the FTC’s prior civil case and jury instructions on the elements of obstruction of justice and Sussman’s theory of defense. View "United States v. Sussman" on Justia Law
Belmont v. MB Inv. Partners, Inc.
Defendants are MB, a registered investment adviser, and people affiliated with MB. A fraudulent scheme was perpetrated by Bloom while he was an employee and officer of MB, through a hedge fund called North Hills that Bloom controlled and managed outside the scope of his responsibilities at MB. Bloom was arrested and indicted in New York in 2009 on charges relating to the Ponzi scheme, by which time most of the money invested in North Hills was gone. Investors filed suit, alleging: controlling person liability under Section 20(a) of the Securities and Exchange Act; negligent supervision; violations of Securities and Exchange Commission Rule 10b-5; violations of the Pennsylvania Unfair Trade Practice and Consumer Protection Law; and breach of fiduciary duty. The district court rejected all claims. The Third Circuit vacated and remanded with respect to MB on the claims for violations of Rule 10b-5 and the state UTPCPL, and otherwise affirmed. View "Belmont v. MB Inv. Partners, Inc." on Justia Law
SBRMCOA, LLC v. Bayside Resort Inc.
The Condominium Association’s declaration required Bayside to provide fresh water and wastewater treatment to the Association and made all of the water facilities common property of the Association. Bayside contracted with TSG to construct and operate a system to fulfill its obligations. TSG charged Bayside $0.02 per gallon. By 2005, Bayside owed millions of dollars to creditors including TSG and the Association. Bayside assigned its rights to TSG, permitting TSG to charge $0.05 per gallon. To secure the Association’s consent Bayside and TSG threatened to cease providing services even though it was not feasible to obtain those services elsewhere. The Association’s Board consented and signed a Water Supply Agreement, which provided that Bayside owned the water facilities and contained an arbitration clause. After not receiving payments under the WSA, TSG temporarily stopped producing potable water for the Association, which then filed suit, asserting criminal extortion under the Racketeer Influenced Corrupt Organizations Act; breach of obligations under the Declaration; and ownership of the water treatment systems. The district court ordered arbitration. The Third Circuit affirmed in part but vacated in part. The Association raised a bona fide question as to whether its Board had authority to enter into the WSA, a question that requires judicial determination. View "SBRMCOA, LLC v. Bayside Resort Inc." on Justia Law
United States v. Maury
Atlantic, a New Jersey pipe foundry, and four of its managers were convicted of conspiring to commit environmental pollution and worker safety violations, attempting to cover up or impede federal investigation of those violations, and violations of the Clean Water Act (33 U.S.C. 1251) and the Clean Air Act (42 U.S.C. 7413(c)). Defendants illegally pumped contaminated water into storm drains that drained into the Delaware River; unlawfully burned 50-gallon drums of paint waste in a cupola and emitted the fumes into the air; and attempted to cover up work-related accidents at its facility, one of which resulted in the death of an employee who was run-over by a forklift. The district court imposed sentences of 70, 41, 30 and six months’ imprisonment on the managers and applied the Alternative Fines Act, 18 U.S.C. 3571(c)(1), rather than the CWA and CAA, and fined Atlantic the maximum penalty of $500,000 per violation on conspiracy, four counts of obstruction, eight CWA counts, and one CAA count for a total fine of $8 million. It also sentenced Atlantic to 4 years’ probation, with a court-ordered monitor to ensure regulatory compliance. The Third Circuit affirmed, rejecting challenges to evidentiary rulings, jury instructions, and the sentences. View "United States v. Maury" on Justia Law
Anderson v. Comm’r of Internal Revenue
In 2005 Anderson was charged with federal tax evasion (26 U.S.C. 7201) for tax years 1995 through 1999, while Anderson was an entrepreneur and venture capitalist involved in operating several international companies, including G & A, which generated hundreds of millions of dollars of income. The government alleged that because G & A was a “controlled foreign corporation,” he was required to recognize a share of its income on his tax return; that he fraudulently failed to do so; and thatAnderson had fraudulently underpaid his taxes by $184 million, 99% of which stemmed from G & A. He pleaded guilty with respect to two years and was sentenced to 108 months imprisonment. In 2007 Anderson filed a petition to redetermine his tax deficiencies, 26 U.S.C. 6213(a). The Tax Court granted partial summary judgment to the IRS. The Third Circuit affirmed. Anderson’s conviction for tax evasion in 1998 and 1999 precludes him, by virtue of collateral estoppel, from contesting in civil fraud proceedings that G & A income was taxable to him in those years. The IRS’s concession of all deficiency and penalty issues for the years 1995, 1996, and 1997 has no preclusive effect on those issues for 1998 and 1999. View "Anderson v. Comm'r of Internal Revenue" on Justia Law
United States v. Stoerr
Stoerr pled guilty to bid rigging, 15 U.S.C. 1; conspiracy to provide kickbacks and to defraud the United States, 18 U.S.C. 371; and assisting in the preparation of false tax returns, 26 U.S.C. § 7206(2). The convictions stemmed from kickback payments that Stoerr solicited and accepted from sub-contractors in connection with environmental remediation projects managed by Sevenson, his employer from 1980 to October 2003. In total, the district court determined that the scheme resulted in losses of $134,098.96 to the EPA and $257,129.22 to Tierra. After Sevenson learned of the kickbacks scheme, it paid Tierra approximately $241,000 to compensate for its losses. It then commenced a civil action against Stoerr in state court to recover its losses, and sought restitution in connection with Stoerr’s sentencing, under the Mandatory Victims Restitution Act, 18 U.S.C. 3663A, for reimbursement of the amount that it paid to Tierra. The district court denied Sevenson‟s request for restitution, instead ordering that Stoerr pay restitution to Tierra. The Third Circuit dismissed; as a non-party, Sevenson lacks standing to appeal. View "United States v. Stoerr" on Justia Law
Zavala v. Wal Mart Stores, Inc.
Wal-Mart cleaning crew members sought compensation for unpaid overtime and certification of a collective action under the Fair Labor Standards Act, civil damages under RICO, and damages for false imprisonment. The workers, illegal immigrants who took jobs with contractors and subcontractors Wal-Mart engaged to clean its stores, alleged: Wal-Mart had hiring and firing authority over them and closely directed their actions such that Wal-Mart was their employer under the FLSA; Wal-Mart took part in a RICO enterprise by transporting and harboring illegal immigrants, encouraging illegal immigration, conspiracy to commit money laundering, and involuntary servitude (18 U.S.C. 1961(1)(F)); Wal-Mart‘s practice of locking some stores at night and on weekends, without always having a manager available with a key, constituted false imprisonment. Over eight years and multiple opinions, the district court rejected final certification of an FLSA class and rejected the RICO and false imprisonment claims on several grounds, and rejected the false imprisonment claim on the merits. The Third Circuit affirmed. Plaintiffs were not “similarly situated” under the FLSA, 29 U.S.C. 626(b). View "Zavala v. Wal Mart Stores, Inc." on Justia Law
United States v. Andrew
Andrews was designated as contractor for improvements to the sewage system, in a no-bid process involving kickbacks and bribery, having made numerous false statements in the bond application package. After the contract was terminated, he submitted a claim of $748,304, based on false statements and duplicate charges. Evidence indicated that Andrews was not capable of the project work and that the entire scheme was fraudulent. He was convicted of one count of conspiracy, 18 U.S.C. 371, four counts of wire fraud, 18 U.S.C. 1343, 1346, and 2, one count of program fraud, 18 U.S.C. 666(a)(1)(B) and 2, one count of making a false claim upon the Government of the Virgin Islands, 14 V.I.C. 843(4), and one count of inducing a conflict of interest, 3 V.I.C. 1102, 1103, and 1107. The Third Circuit affirmed the conviction, but remanded for resentencing. Errors in the indictment and jury instructions concerning honest services fraud did not affect substantial rights. Although the 151-month term of imprisonment was within the statutory maximum for Counts Two through Five, it exceeded the statutory maximum for Counts One and Six; it was not possible to determine whether the sentence was legal as to each count View "United States v. Andrew" on Justia Law
In Re: Grand Jury
ABC is a dissolved corporation. Doe 1 was the company’s President and sole shareholder. Doe 2 is his son. LaCheen represents ABC and Doe 1; Blank represents Doe 2. The law firms have a joint-defense agreement covering the three. Investigating tax implications of ABC’s acquisition and sale of closely held companies, the government issued a grand jury subpoena to ABC’s former vice president as custodian of records. The documents are in custody of Blank. ABC refused to accept service of the subpoena issued to its former employee. The government issued subpoenas to LaCheen and Blank. The firms withheld documents listed on a privilege log. The government sought to compel ABC, Blank, and LaCheen to produce documents identified on the privilege logs, citing cited the crime-fraud doctrine, which provides that evidentiary privileges may not be used to shield communications made for purposes of getting advice for commission of a fraud or crime. The district court entered the order. The Third Circuit dismissed for lack of appellate jurisdiction. To obtain immediate appellate review, a privilege holder must disobey the order, be held in contempt, then appeal the contempt order. That route is available to ABC, which can obtain custody of the documents from its agent. View "In Re: Grand Jury" on Justia Law
United States v. DeMuro
Defendants owned an engineering and surveying company. Between 2002 and 2008, it failed to pay the IRS more than $500,000 in taxes withheld from employee paychecks. They were convicted of conspiracy to defraud the United States, 18 U.S.C. 371, and 21 counts of failure to account and pay over employment taxes, 26 U.S.C. 7202. The Third Circuit affirmed the convictions, rejecting claims of evidentiary errors, but remanded for resentencing. The district court erred in imposing a two-level increase to the offense levels for abuse of a position of trust, pursuant to U.S.S.G. 3B1.3.View "United States v. DeMuro" on Justia Law