Justia White Collar Crime Opinion Summaries

Three individuals who worked as precious metals futures traders at major financial institutions were prosecuted for engaging in a market manipulation scheme known as spoofing. This practice involved placing large orders on commodities exchanges with the intent to cancel them before execution, thereby creating a false impression of market supply or demand to benefit their genuine trades. The traders’ conduct was in violation of both exchange rules and their employers’ policies, and the government charged them with various offenses, including wire fraud, commodities fraud, attempted price manipulation, and violating the anti-spoofing provision of the Dodd-Frank Act.The United States District Court for the Northern District of Illinois, Eastern Division, presided over separate trials for the defendants. In the first trial, two defendants were convicted by a jury on all substantive counts except conspiracy, after the court denied their motions for acquittal and a new trial. The third defendant, tried separately, admitted to spoofing but argued he lacked the requisite criminal intent; he was convicted of wire fraud, and his post-trial motions were also denied. The district court made several evidentiary rulings, including admitting lay and investigator testimony, and excluded certain defense exhibits and instructions.The United States Court of Appeals for the Seventh Circuit reviewed the convictions and the district court’s rulings. The appellate court held that spoofing constitutes a scheme to defraud under the federal wire and commodities fraud statutes, and that the anti-spoofing statute is not unconstitutionally vague. The court found sufficient evidence supported all convictions, and that the district court did not abuse its discretion in its evidentiary or jury instruction decisions. The Seventh Circuit affirmed the convictions and the district court’s denial of post-trial motions for all three defendants. View "United States v. Smith" on Justia Law

In early 2015, Daniel Stewart was stopped by Indianapolis police for a traffic violation, leading to the discovery of a handgun, over $9,000 in cash, and more than 800 grams of illegal narcotics in his car. A subsequent search of his home revealed additional drugs, nearly $500,000 in cash, and five more firearms. Stewart was found to be laundering drug proceeds through sham businesses. He was convicted in November 2016 on multiple counts, including drug distribution, firearm possession, and money laundering.The United States District Court for the Southern District of Indiana initially sentenced Stewart to life imprisonment plus five years. Stewart appealed, but the Seventh Circuit affirmed his convictions. He then sought postconviction relief, arguing that recent case law invalidated his sentence enhancements. The government conceded, and the district court ordered resentencing. At resentencing, the court imposed a 360-month term of imprisonment, considering Stewart's efforts at rehabilitation but also the severity of his crimes.The United States Court of Appeals for the Seventh Circuit reviewed Stewart's appeal of his resentencing. Stewart argued that the district court miscalculated his sentencing range under the career-offender guideline and misunderstood its discretion regarding his rehabilitation efforts. The Seventh Circuit found that the district court correctly applied the career-offender guideline and did not err in its consideration of Stewart's rehabilitation. The court also held that the district court provided a sufficient explanation for the increased sentences on the money laundering counts, which did not affect the overall sentence. The Seventh Circuit affirmed the district court's decision, upholding Stewart's 360-month sentence. View "United States v. Stewart" on Justia Law

Brian Fenner and Dennis Birkley were convicted of seventeen counts related to a fraud scheme involving the manipulation of Indiana’s mechanic’s lien statute. Fenner, who ran a towing company, and Birkley, who financed the operation, conspired to inflate the value of mechanic’s liens on vehicles and conducted sham auctions to obtain clean titles, which they then sold for profit. The scheme involved towing vehicles from across the country to Indiana, inflating lien values, and holding fake auctions at unreasonable hours to ensure no legitimate buyers attended. Birkley would then falsely claim to have purchased the vehicles at these auctions and apply for clean titles, which extinguished the creditors' interests.The United States District Court for the Southern District of Indiana convicted both defendants on all counts. Fenner and Birkley were sentenced to 70 and 60 months in prison, respectively, and ordered to pay $49,045.84 in restitution. Fenner and Birkley appealed, arguing that the district court made several errors, including allowing improper testimony and violating Fenner’s Sixth Amendment rights by admitting Birkley’s unredacted statement to law enforcement.The United States Court of Appeals for the Seventh Circuit reviewed the case and found that the district court did not abuse its discretion in its evidentiary rulings. The court held that the testimony of the government witnesses was proper and that any potential errors were harmless given the overwhelming evidence of guilt. The court also found no plain error in the admission of Birkley’s statement, as it was consistent with Fenner’s defense and did not significantly impact the jury’s verdict. Additionally, the court rejected Birkley’s ex post facto argument and upheld the restitution calculation, finding it supported by the evidence.The Seventh Circuit affirmed the convictions and sentences of Fenner and Birkley. View "United States v. Birkley" on Justia Law

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