Justia White Collar Crime Opinion Summaries

Federal agents investigated a drug trafficking conspiracy in Fort Wayne, Indiana, using a confidential source to conduct controlled buys from Zachary Barnes. Barnes coordinated the sales, supplied methamphetamine, and directed his co-conspirator, Marquese Neal, to make deliveries. Neal testified that Barnes paid him in marijuana for his services. Barnes was arrested, and law enforcement found drugs and ammunition in his home.Barnes pleaded guilty to conspiracy to distribute methamphetamine and to possess it with intent to distribute. The United States District Court for the Northern District of Indiana applied a two-level enhancement under section 3B1.1(c) of the Sentencing Guidelines for Barnes' role as a manager or supervisor. This enhancement made Barnes ineligible for safety-valve relief under 18 U.S.C. § 3553(f), resulting in a mandatory minimum sentence of ten years. Barnes objected to the role enhancement and the denial of safety-valve relief, but the district court overruled his objections, finding Neal's testimony credible and supported by other evidence.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court affirmed the district court's application of the role enhancement, agreeing that Barnes' actions—recruiting Neal, coordinating logistics, supplying drugs, and directing deliveries—fit the criteria for a manager or supervisor under section 3B1.1(c). The court also upheld the denial of safety-valve relief, as Barnes' supervisory role made him ineligible. The Seventh Circuit found no clear error in the district court's credibility determinations or factual findings and affirmed Barnes' ten-year sentence. View "United States v. Barnes" on Justia Law

Gary Matthews and Monte Brannan collaborated on a project to redevelop a landmark hotel in Peoria, Illinois. Instead of fulfilling their financial obligations to lenders, they diverted project revenue for personal gain. This led to federal charges of mail fraud and money laundering, resulting in guilty verdicts by a jury.The United States District Court for the Central District of Illinois oversaw the initial trial. Matthews and Brannan were convicted of mail fraud, money laundering, and, in Brannan’s case, conspiracy to commit money laundering. They appealed their convictions, raising multiple issues.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court found the evidence against Matthews and Brannan overwhelming, affirming their convictions. The court noted that Matthews and Brannan failed to comply with Circuit Rule 30(b)(1) by not including necessary district court rulings in their appendices, which hindered the appellate review process. Despite this, the court ensured a fair review by independently locating the relevant rulings. The court ordered Matthews’s and Brannan’s counsel to show cause why they should not be sanctioned for their violations of Circuit Rule 30. The court affirmed the district court’s judgment, ensuring that Matthews and Brannan received fair consideration of their appeals. View "USA v Brannan" on Justia Law

Derrick Clark and Shawn Mesner worked for Didion Milling, Inc., a corn milling company. In May 2017, Didion’s grain mill exploded, killing five employees. The Occupational Health and Safety Administration (OSHA) investigated and referred Didion for criminal prosecution. The government charged Didion and several employees with federal crimes related to their work at the mill. Clark and Mesner proceeded to trial, challenging the district court’s evidentiary rulings, jury instructions, the indictment, the sufficiency of the evidence, and the constitutionality of their convictions.The United States District Court for the Western District of Wisconsin convicted Clark on four counts and Mesner on two counts. Clark was found guilty of conspiracy to commit federal offenses, false entries in records, using false documents within the EPA’s jurisdiction, and obstruction of agency proceedings. Mesner was found guilty of conspiracy to commit mail and wire fraud and conspiracy to commit federal offenses. Both defendants were sentenced to 24 months’ imprisonment and one year of supervised release.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court vacated Mesner’s conviction on Count 4, remanding for an entry of judgment of acquittal and further proceedings consistent with the opinion. The court affirmed the district court’s evidentiary rulings and jury instructions, as well as Clark’s convictions and Mesner’s conviction on Count 1. The court found sufficient evidence to support the convictions and determined that the jury instructions, when considered as a whole, accurately reflected the law. The court also rejected challenges to the constitutionality of the OSHA regulation involved. View "USA v Mesner" on Justia Law

Mark Sorensen, owner of SyMed Inc., a Medicare-registered distributor of durable medical equipment, was involved in a business arrangement with PakMed LLC, Byte Success Marketing, and Dynamic Medical Management. They advertised orthopedic braces, obtained signed prescriptions from patients' doctors, distributed the braces, and collected Medicare reimbursements. Byte and KPN, another marketing firm, advertised the braces, and interested patients provided their information, which was forwarded to call centers. Sales agents then contacted patients, generated prescription forms, and faxed them to physicians for approval. Physicians retained discretion to sign and return the forms, with many choosing not to.A federal grand jury indicted Sorensen on four counts: one count of conspiracy and three counts of offering and paying kickbacks for Medicare referrals. The jury found Sorensen guilty on all counts. Sorensen moved for acquittal, arguing insufficient evidence and lack of awareness of the scheme's illegality. The district court denied his motions, finding the evidence sufficient for the jury to conclude Sorensen knew the fee structure and purchase of doctors' orders were illegal. Sorensen was sentenced to 42 months in prison but was released on bond pending appeal.The United States Court of Appeals for the Seventh Circuit reviewed the case and reversed the district court's judgment due to insufficient evidence. The court found that Sorensen's payments to PakMed, KPN, and Byte were for advertising, manufacturing, and shipping services, not for patient referrals. The court emphasized that the Anti-Kickback Statute targets payments to individuals with influence over healthcare decisions, which was not the case here. The court concluded that Sorensen's actions did not violate the statute, as there was no evidence of improper influence over physicians' independent medical judgment. View "USA v Sorensen" on Justia Law

Brian Gustafson was convicted of wire fraud in the United States District Court for the Northern District of Illinois. He was employed as a manager at a Public Storage facility in Deerfield, Illinois, where he facilitated the theft of valuable items from a tenant's storage unit. Gustafson provided a key to John Garcia, who, along with Marilyn Rothschild, sold the stolen items. The stolen goods included antiques and artwork valued at $185,000. Garcia and Rothschild sold these items to buyers, receiving payments in cash and checks, which initiated interstate wire transfers.The district court sentenced Gustafson to twenty-four months in prison, followed by two years of supervised release, and ordered him to pay $330,237 in restitution. Gustafson filed motions for a judgment of acquittal and a new trial, arguing that he did not cause the interstate wire transmissions. The district court denied these motions, concluding that while Gustafson may not have known wire transmissions would occur, their use was reasonably foreseeable given the high value of the stolen items.The United States Court of Appeals for the Seventh Circuit reviewed the case. Gustafson challenged the sufficiency of the evidence for his wire fraud conviction, prosecutorial misconduct during closing arguments, and the restitution order. The appellate court held that the use of wires was reasonably foreseeable due to the high value and volume of the stolen items and the involvement of geographically distant buyers. The court also found that the prosecutor's comments during closing arguments did not deprive Gustafson of a fair trial and that the restitution order did not violate his Sixth Amendment rights. Consequently, the Seventh Circuit affirmed the district court's judgment. View "USA v Brian Gustafson" on Justia Law

Jeffery Henson was convicted of federal fraud, including aggravated identity theft, money laundering, and wire fraud, for diverting nearly $330,000 from his employer to his personal account. He was ordered to pay $436,495.93 in restitution. Following his arrest, Illinois police found $17,390 in cash in his car. The government sought to apply this cash towards Henson's restitution, but Henson argued that the money was obtained through an illegal search and seizure, as the warrant was issued nine hours after the search.The United States District Court for the Central District of Illinois, through a magistrate judge, granted the government's motion to turn over the cash. Henson appealed, contending that the magistrate judge lacked the authority to issue a final decision on the matter.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court determined that the magistrate judge acted outside of his authority, as there was no final decision in the case. The Federal Magistrates Act and the local rules of the Central District of Illinois did not authorize the magistrate judge to issue a final decision on the turnover motion without the district court's explicit assignment. Consequently, the Seventh Circuit dismissed the appeal for lack of appellate jurisdiction, as the magistrate judge's order was not an appealable final decision. View "USA v Henson" on Justia Law

Eric Kyereme was indicted on five counts of wire fraud for misleading investors in his company, Sika Capital Management, LLC. He solicited $200,000 for the "Alpha Fund," which he lost through poor trading. Instead of informing investors, he created fake account statements to show positive returns. Kyereme pleaded guilty to one count but disputed his dealings with Da Zhou, a business associate who invested $133,000, allegedly for shares in RestoreFlow Allografts (RFA). The government claimed Kyereme used Zhou's money to cover Alpha Fund losses, while Kyereme argued it was a legitimate transaction.The United States District Court for the Northern District of Illinois held an evidentiary hearing and found that Kyereme defrauded Zhou. The court determined that Zhou's $133,000 investment was part of the wire fraud scheme, increasing the total loss amount to $335,500. This led to a higher offense level and a sentencing range of 41 to 51 months. The court sentenced Kyereme to 36 months in prison, three years of supervised release, and ordered $185,500 in restitution, including $135,500 to Zhou.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court found no clear error in the district court's determination that the Zhou transaction was part of the wire fraud scheme. The court noted that the evidence, including the membership agreement and the Primrose operating agreement, supported the finding that Kyereme defrauded Zhou. The appellate court also held that Kyereme had sufficient notice that the district court would rule on the Zhou transaction at the final sentencing hearing. Consequently, the Seventh Circuit affirmed Kyereme's sentence. View "United States v. Kyereme" 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

In the 1990s, Terzakis met Berenice Ventrella, the trustee for a family trust with extensive real‐estate holdings. Terzakis managed and developed real estate and eventually managed some of Berenice’s property. In 2007, they created an LLC to hold one of Berenice’s properties. Berenice appointed her son Nick, who had Asperger syndrome, as the Ventrella Trust’s successor trustee. After Berenice's 2008 death, Terzakis opened an account for the “Estate of Berenice Ventrella,” took Nick to banks and had him transfer funds from Berenice’s accounts into this new account, transferred $4.2 million from the estate account to the LLC account, which he controlled, then transferred $3.9 million from the LLC account to his personal accounts. Nick was the only witness with personal knowledge of Terzakis’s statements about the transfers. Prosecutors interviewed Nick. The government informed the grand jury that Nick had cognitive problems; Nick did not testify. Days before the limitations period expired, the grand jury returned a five‐count indictment for transmitting stolen money, 18 U.S.C. 2314. Before trial, the government learned that Nick had been diagnosed with brain cancer, with a prognosis of six months. The government informed Terzakis of the diagnosis. The parties resumed plea negotiations. Terzakis rejected the government’s plea offer. The government dismissed the case, citing Nick’s unavailability. The Seventh Circuit affirmed denial of Terzakis’s motion to recover attorney fees under 18 U.S.C. 3006A. View "United States v. Terzakis" on Justia Law

After defendant was dismissed from an investment firm, he launched a finance company in Wilmette, Illinois, then used investors’ money for personal purposes, including paying his gambling debts. Defendant pleaded guilty to wire fraud, 18 U.S.C. 1343. The presentence investigation report stated that his guideline prison-sentence range was 70-87 months, based on an estimation that the loss to the victims slightly exceeded $1.8 million. The district judge sentenced the defendant to 75 months in prison and to pay restitution. The Seventh Circuit affirmed, rejecting an argument that the financial loss he caused was closer to $1 million, which would have put him in a lower guidelines range, and that a shorter term would give him more time to earn money to make restitution. The testimony of the elderly victim-witnesses was “harrowing and uncontradicted.” Gold provided no evidence to support his challenge to the government’s estimate of the victims’ losses. Even if Gold were given no prison sentence, he would be unable to provide substantial restitution to the victims of his fraud, given that he was 60 years old, had never graduated from college, lacked full-time employment, and had a negative net worth. View "United States v. Gold" on Justia Law