Justia White Collar Crime Opinion Summaries

Kennedy was Sheila’s husband and Scarborough was her close friend. They solicited money for investment in Sheila’s alleged real estate deals and proceedings to obtain an inheritance purportedly worth hundreds of millions of dollars. The multi-year scheme defrauded dozen of victims of more than three million dollars. Both Kennedy and Scarborough were convicted of mail and wire fraud. Scarborough was convicted on a separate money-laundering count. The district court subsequently sentenced Kennedy to 100 months of imprisonment and ordered him to pay more than $3 million in restitution. Scarborough was sentenced to 72 months of imprisonment and ordered to pay more than $2.6 million in restitution. The Sixth Circuit affirmed the convictions and sentences. View "United States v. Kennedy" on Justia Law

In 2004 Wallace financed a home purchase with a $272,315 mortgage. He took a second mortgage of $164,500 for improvements and to pay down debt. In 2006, Wallace sought a refinance loan of $422,500. Midwest obtained an appraisal from Brock, through the now-defunct Accupraise. A former Accupraise employee explained that Midwest would send a requested appraisal value and Brock would return a tailor-made appraisal, often without seeing the property. Accupraise and Brock valued Wallace’s home at $500,000. Unbeknownst to Wallace, his refinance was an adjustable-rate mortgage that allows negative amortization; he had a teaser rate of two percent that quickly multiplied. For securing a high long-term interest rate, Midwest received a premium in excess of $14,000. The loan created insurmountable financial problems for Wallace. He learned that the true 2006 value of his home was $375,000. Wallace declared bankruptcy, surrendered the home, and sued alleging that he was the victim of a fraudulent scheme violating the Racketeer Influenced and Corrupt Organizations Act and Kentucky conspiracy law. Mediation produced a settlement, under which Wallace prevailed on a RESPA claim. The district court granted defendants partial summary judgment. The Sixth Circuit reversed a finding that Wallace did not sufficiently demonstrate that the appraisal proximately caused his financial injuries, but otherwise affirmed. View "Wallace v. Midwest Fin. & Mortg. Servs., Inc." on Justia Law

Based on a mortgage fraud scheme that caused the U.S. Department of Housing and Urban Development (HUD) to insure loans for unqualified applicants based upon forged documents and false information provided by Wendlandt, he pled guilty to one count of conspiracy to defraud the United States, 18 U.S.C. 371, and was sentenced to 42 months in prison. The Sixth Circuit affirmed, rejecting challenges to the district court’s computation of financial loss for purposes of determining his offense level under U.S.S.G. 2B1.1 and to the court’s decision to vary upward from the advisory Guidelines range of 24 to months in prison. View "United States v. Wendlandt" on Justia Law

In 2004, El Camino executed equipment leases with Cyberco, a corporation held out to be a computer sales and consulting business. Cyberco actually operated under several names and was engaged in fraud. Its affiliate, Teleservices, a shell corporation, was represented as an arms-length computer manufacturer. The equipment to be leased by El Camina, which likely never existed, was allegedly manufactured by Teleservices and delivered to Cyberco, which released payment to Teleservices. In 2002, Huntington established a banking relationship with Cyberco. Cyberco used its accounts to deposit funds from El Camino. Huntington investigated a series of overdrafts. Ultimately Cyberco elected to undergo a “gradual migration” from Huntington, and Huntington agreed to credit extensions for Cyberco during the transition. El Camino purchased more than $25 million in computer equipment. El Camino sued Huntington for conversion, aiding and abetting conversion, aiding and abetting fraud, and unjust enrichment. The district court granted summary judgment on the first three claims, concluding that El Camino could not establish the requisite level of knowledge to sustain aiding and abetting and conversion claims. It later dismissed the unjust enrichment claim. The Sixth Circuit affirmed, stating that findings, in a related bankruptcy case, that Huntington did not act in good faith, were irrelevant. View "El Camino Res., LTD. v. Huntington Nat'l Bank" on Justia Law

The Securities and Exchange Commission filed a civil enforcement action against 12 defendants, alleging that they violated registration, disclosure, and anti-fraud provisions of federal securities law, in connection with a “reverse merger” that involved creation of a shell company for the purpose of OTC trading, followed my merger of a private company into the shell, with an exchange of stock. A reverse merger enables a private company to access public markets without undertaking the expensive process of an initial public offering. One of the defendants, Tsai, has formed more than 100 shell companies.The district court granted the SEC partial summary judgment and granted permanent injunctions against the defendants. Tsai appealed. The Sixth Circuit affirmed entry of the injunction. Tsai’s failure to challenge findings with respect to his industry experience and education means the court did not abuse its discretion in finding he had at least some degree of scienter. View "Secs. & Exch. Comm'n v. Sierra Brokerage Servs, Inc." on Justia Law

Peppel, former President, CEO, and Chairman of the Board of Directors of MCSi, a publicly-traded communications-technology company, conspired with CFO Stanley to falsify MCSi accounting records and financial statements in order to conceal the actual earnings from shareholders, while laundering proceeds from the sale of his own shares in a public stock offering. Peppel pleaded guilty to conspiracy to commit securities, mail, and wire fraud, 18 U.S.C. 1371 and 1349; willful false certification of a financial report by a corporate officer,18 U.S.C. 1350; and money laundering, 18 U.S.C. 1957. The parties stipulated to use of the 2002 Sentencing Guidelines Manual The district court heard testimony and received reports on five competing amount-of-loss theories and, based almost solely on its estimation of Peppel as “a remarkably good man,” varied downward drastically from this advisory range, imposing a custodial sentence of only seven days—a 99.9975% reduction. The Sixth Circuit vacated, holding that the district court abused its discretion by imposing an unreasonably low sentence, but did not err in calculating the amount of loss or number of victims. View "United States v. Peppel" on Justia Law

Governor Strickland appointed Terry to fill a vacancy on the Cuyahoga County Court of Common Pleas. Terry sought reelection to retain the seat and enlisted the help of County Auditor Russo, a presence in Cleveland politics. The FBI was investigating Russo and had tapped his phones. Russo had a phone conversation with an attorney about foreclosure cases on Terry’s docket and promised to make sure Terry did what he was “supposed to do.” Later, by phone, Russo told Terry to deny motions for summary judgment. Terry said he would and did so. Russo ultimately pled guilty to 21political corruption counts and received a 262-month prison sentence. Terry was convicted of conspiring with Russo to commit mail fraud and honest services fraud; and honest services fraud by accepting things of value from Russo and others in exchange for favorable official action, 18 U.S.C. 201(b)(2).. The district court sentenced him to 63 months. The Sixth Circuit affirmed, quoting once-Speaker of the California General Assembly, Jesse Unruh, “If you can’t eat [lobbyists’] food, drink their booze, . . . take their money and then vote against them, you’ve got no business being [in politics],” View "United States v. Terry" on Justia Law

For more than 20 years, Kurlemann built and sold luxury homes in Ohio. In 2005-2006 he borrowed $2.4 million to build houses in Mason. When neither sold, he enlisted realtor Duke, who found two straw buyers, willing to lie about their income and assets on loan applications that Duke submitted to Washington Mutual. Both buyers defaulted. Duke pled guilty to seven counts, including loan fraud and making false statements to a lending institution, and agreed to testify at Kurlemann’s trial. A jury convicted Kurlemann of six counts, including making false statements to a lending institution, 18 U.S.C. 1014; and bankruptcy fraud, 18 U.S.C. 157. The district court sentenced Kurlemann to concurrent 24-month sentences and ordered him to pay $1.1 million in restitution. The district court sentenced Duke to 60 months. The Sixth Circuit affirmed the bankruptcy fraud conviction, based on Kurlemann’s concealment of his interest in property, but reversed and remanded his false statements conviction, finding that the trial court improperly instructed the jury that concealment was sufficient to support conviction. The court also reversed Duke’s sentence, finding that the court failed to explain the sentence it imposed. View "United States v. Kurlemann" on Justia Law

Wyko sold parts to tire manufacturers, but in the U.S., provided parts for steel tire-assembly machines only for Goodyear. Wyko contracted with HaoHua, owned by the Chinese government, to supply parts unlike any it had previously built. Goodyear used machines like those Wyko needed. Goodyear asked Wyko to repair tire-assembly machines. Wyko sent engineers. Before their visit, both signed agreements that they might have access to trade secrets or other confidential information and that they would not disclose that information. A security guard reminded them that no cameras were allowed inside the factory. Unescorted for a few minutes, one engineer used his cell-phone camera to take photos that were forwarded to the design team. Wyko’s IT manager forwarded the e-mail to Goodyear. Goodyear notified the FBI. Convicted of theft of trade secrets (18 U.S.C. 1832(a)) and wire fraud (18 U.S.C. 1343, 1349), the engineers were sentenced to four months of home confinement, community service, and probation. The Sixth Circuit affirmed the convictions, rejecting an argument that the photographs did not meet the statutory definition because Goodyear did not take “reasonable measures” to protect secrecy. The court reversed the sentences because the court had not adequately explained its calculation of loss. View "United States v. Howley" on Justia Law

In 2008, Baniel (an LLC owned by Coffman), Coffman, and her husband Bryan obtained financing from Bank of America to purchase a yacht, giving Bank of America a secured interest. Months later, the United States filed a civil forfeiture in rem complaint against several properties, owned by Coffman and Bryan, alleged to be proceeds of fraud and money laundering. Given the pending criminal investigations, the district court immediately stayed civil forfeiture proceedings. Coffman filed a verified claim to the yacht in 2009. Coffman was acquitted in 2011, but Bryan was convicted of mail fraud, wire fraud, securities fraud, and money laundering. Payments to Bank of America have not been made since December 2009, and approximately $637,000 is owed on the note. In February 2011, Bank of America and the government filed a joint motion for interlocutory sale of the yacht. Baniel sought release of the yacht to Coffman’s custody. In February 2012, the district court ordered the interlocutory sale, denied release of the yacht to Baniel, and joined the civil action with the ongoing criminal action. Baniel and Coffman sought a stay of the sale pending appeal, which was denied by the district court. The Sixth Circuit affirmed all orders. View "United States v. Real Prop. & Residence" on Justia Law