Justia White Collar Crime Opinion Summaries

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

Minhas defrauded customers of his Chicago travel agencies and airlines through a scheme in which he collected payment for airline reservations that he canceled without his customers’ knowledge, by manipulating the two-tiered online ticket-reservation system. Minhas was convicted of wire and mail fraud, 18 U.S.C. 1341 and 1343 in two separate cases: one that proceeded to a bench trial and one in which Minhas pleaded guilty in 2015. At a consolidated sentencing hearing, the district court imposed two partially concurrent prison terms totaling 114 months. The Seventh Circuit affirmed, rejecting a challenge the district court’s application of the Sentencing Guidelines’ enhancement for causing “substantial financial hardship” to the two sets of victims (U.S.S.G. 2B1.1(b)(2)). The court acknowledged that it had “seen stronger evidence,” but was not convinced that the district court committed clear error in its assessment of the record. View "United States v. Minhas" on Justia Law

The defendants were indicted for committing and conspiring to commit wire fraud, 18 U.S.C. 1343 & 1349, by extracting money from lenders (including Bank of America) that had financed the sale of defendants' Gary, Indiana properties. The defendants had represented that buyers of the properties were the source of the down payments; the defendants had actually given the buyers the money to enable them to make the down payments. They had also helped the buyers provide, in loan applications, false claims of creditworthiness. The judge ordered restitution of $893,015 to Bank of America. The Seventh Circuit remanded, directing the court to consider an alternative remedy. Restitution is questionable because Bank of America, though not a coconspirator, did not have clean hands. It ignored clear signs that the loans were “phony.” The court referred to a history of “shady” practices and characterized the Bank as “reckless.” The court acknowledged that the Mandatory Victim Restitution Act requires “mandatory restitution to victims,” 18 U.S.C. 3663A, for “an offense resulting in damage to or loss or destruction of property of a victim of the offense,” but stated that Bank of America was deliberately indifferent to the risk of losing its own money, because it intended to sell the mortgages and transfer the risk of loss to Fannie Mae for a profit. View "United States v. Tartareanu" on Justia Law

Dr. Kohli, a board-certified neurologist with extensive training in the treatment of chronic pain, operated the Kohli Neurology and Sleep Center in Effingham, Illinois. Irregularities in the practice eventually caught the attention of federal officials; he was indicted on three counts of healthcare fraud, two counts of money laundering, and 10 counts of illegal dispensation of a controlled substance (Controlled Substances Act, 21 U.S.C. 841(a)). During a 15-day trial, the jury learned about Dr. Kohli’s prescribing practices from law enforcement and healthcare professionals, expert witnesses, and his patients and their family members. The Seventh Circuit affirmed, upholding various evidentiary rulings and jury instructions and finding the verdict supported by substantial evidence. The court rejected an argument that the district court somehow conflated the standards for civil and criminal liability, or that it otherwise misled the jury into believing that it could find Dr. Kohli criminally liable for engaging in mere civil malpractice. View "United States v. Kohli" on Justia Law

Plaintiffs alleged that, beginning in 1997, Swiech Group looted Krakow Business Park’s assets, diluting the value of the firm and of their shares. All of the claimed actions, including sham contracts, took place in Poland. Some of Swiech’s proceeds were allegedly funneled to Chicago‐area businesses and properties. Adam Swiech was arrested by the Polish authorities and charged with money laundering, forgery, tax evasion, and leading an organized crime ring, in connection with his conduct at the Business Park. He has been convicted on some of the charges. In a second round of litigation, plaintiffs alleged violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(d) (RICO), naming multiple defendants related to Swiech, including attorneys. The district court concluded that plaintiffs were estopped from asserting certain aspects of their claim and that nothing in the complaint plausibly asserted that the lawyer-defendants stepped over the line between representation of their clients and participation in a RICO conspiracy. The Seventh Circuit affirmed, citing the scope of its appellate jurisdiction, and reasoning that any wrongdoings in the course of lawyers' representation were outside the scope of the asserted RICO conspiracy. “Although the supplemental complaints paint a dismal picture of these attorneys’ behavior, assuming the truth of the allegations of disregard for the alleged neutrality principle, misleading billing statements, and the like, these problems must be addressed in a different forum.” View "Domanus v. Locke Lord LLP" on Justia Law

In 2007 Sentinel Management Group collapsed. Sentinel managed short-term cash investments for futures commission merchants, individuals, hedge funds, and other entities. Its bankruptcy left customers and creditors in the lurch: over $600 million was lost. Sentinel’s president and CEO, Bloom, was convicted of 18 counts of wire fraud and investment adviser fraud, based on evidence that Bloom, despite assuring customers otherwise, put their funds at significant risk by using them as collateral for Sentinel’s risky proprietary trading; that Bloom fraudulently manipulated the rates of return paid to clients on their investments; and that Bloom continued to accept new customer funds even after he knew that Sentinel was about to collapse. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence and to evidentiary rulings and claims of prosecutorial misconduct by characterization of evidence and by accusing the defense of wasting time. The court upheld the district court’s choice of a jury instruction on the meaning of a federal regulation governing futures commission merchants and its imposition of a sentence of 168 months in prison. View "United States v. Bloom" on Justia Law

The Seventh Circuit affirmed Trudeau’s fraud conviction and his $38 million civil contempt judgment after he refused to surrender profits made from violating Federal Trade Commission orders. Trudeau claimed to be destitute. The FTC demanded that firms thought to be affiliated with Trudeau turn over business records. One such entity, Website Solutions, hired the Law Firms to represent it in connection with the demand. The district judge concluded that Website was under Trudeau’s control and appointed a receiver to marshal assets of Website and Trudeau’s other entities. The receiver collected approximately $8 million. The court approved the receiver’s plan, rejected the Firms’ request for compensation from funds in the receiver’s custody, approved the receiver’s compensation, accepted the final report, and authorized the receiver to send remaining funds to the FTC, closing the receivership. The Seventh Circuit affirmed, rejecting an argument that the Firms’ fees should be paid ahead of compensation for Trudeau’s victims. Before the Firms were hired by Website, a federal court had already directed Trudeau to turn over all proceeds of his improper commercial activities. That order created a lien on Website’s assets, senior to any claim created later. As a proxy for Trudeau, Website had no right to make commitments to pay third parties with funds belonging to Trudeau’s victims. View "Federal Trade Commission v. Trudeau" on Justia Law

At USARMS, Burns provided estate-planning services and offered clients an investment in promissory notes that USARMS sold. The notes were allegedly backed by Turkish bonds. USARMS’s owners, Durmaz and Pribilski, claimed to have a connection in the Turkish government that allowed them to purchase the bonds at a below-market rate. USARMS guaranteed an 8.5 percent rate of return and told investors that returns could be as high as 14 percent. In reality, USARMS never purchased Turkish bonds. Durmaz and Pribilski used the investments for their personal use and to pay earlier investors “returns.” Burns was unaware of that deception. Before charges were filed, Durmaz fled the country and Pribilski died. Based on the government’s assertion that that Burns had induced victims to invest by falsely telling them that he had experience managing investments and that he and his family had invested in the bonds, a jury convicted Burns of wire fraud and mail fraud. The district court enhanced Burns’s sentence, ordered restitution, and ordered forfeiture based on the victims’ $3.3 million total loss in the Ponzi scheme. The Seventh Circuit affirmed the conviction, rejecting a claim of insufficient evidence of material misrepresentations. The court remanded the sentencing enhancement and the restitution order because the district court failed to address proximate cause. View "United States v. Burns" on Justia Law