Justia White Collar Crime Opinion Summaries

Sixth Circuit upholds allowing jury questions in online extortion case.Using the pseudonym “Dr. Evil,” an extortionist demanded $1 million in Bitcoin in exchange for an encryption key to Mitt Romney’s unreleased tax returns, which he claimed to have stolen from an accounting firm. He posted an image of Mike Myers’s Dr. Evil, from an Austin Powers movie, in the accounting firm’s Franklin, Tennessee office lobby. Agents traced the scheme to Brown, who had not actually stolen Romney’s returns. With 12 convictions for wire fraud and extortion, Brown was given a four-year prison sentence, and ordered to pay restitution. The Sixth Circuit affirmed his conviction, rejecting arguments that the search warrant lacked probable cause and that Brown was prejudiced by the judge allowing questions from the jury. The affidavit offered “a fair probability” that Brown’s home would contain evidence of the crime. Understanding the evidence required the jury to grasp the Secret Service’s forensic analysis of thumb drives, online posts, and Brown’s computers, Bitcoin, fingerprint matching, and digital photo manipulation-- enough complexity for a court to believe that permitting questions might aid jurors. The court vacated the sentence. Brown’s statements to prosecutors did not significantly impede the investigation, to justify the obstruction of justice enhancement. View "United States v. Brown" on Justia Law

Simmerman began working at Shoreline Federal Credit Union in 1987 and became manager in 2006. She began embezzling money, by complex manipulation of ledgers, in 1998 and was discovered in 2014. She pled guilty to embezzling $1,528,000, 18 U.S.C. 657, and to structuring the deposits of the money she stole to evade the reporting requirements of 31 U.S.C. 5313(a), in violation of 31 U.S.C. 5324(a)(3) and (d)(1). The district court assessed Simmerman’s total offense level at 28, based on a base offense level of seven, a 16-level increase for a loss amount between $1 million and $2.5 million, a two-level increase for sophisticated means, four-level increase for jeopardizing the soundness of a financial institution, a two-level increase for abuse of a position of trust, and a three-level reduction for acceptance of responsibility and a timely plea. With a criminal history category of I, Simmerman’s guideline range was 78-97 months and she was sentenced to 78 months on Count 1 and 60 months on Count 2, to be served concurrently. The Sixth Circuit affirmed, upholding the imposition of enhancements for sophisticated means (U.S.S.G. 2B1.1(10)(C)); jeopardizing the soundness of a financial institution (U.S.S.G. 2B1.1(b)(16)(B)(i)); and abuse of a position of trust (U.S.S.G. 3B1.3). View "United States v. Simmerman" on Justia Law

Between 2012 and 2014, three University of Michigan students (plaintiffs) rented rooms from Alawi, which collected $2550 in security deposits from the three. When they moved out, they received their security deposits back, minus small deductions for minor damages to the properties. Plaintiffs believed that Alawi had not complied with Michigan law, which requires landlords to deposit security deposits in a regulated financial institution and to provide the address of that institution to the tenant. The plaintiffs sued Alawi for $6.6 million on behalf of a putative class of six years’ worth of tenants, alleging violations of Racketeer Influenced and Corrupt Organizations Act (RICO) and Michigan law; alleging that Alawi was not entitled to hold security deposits at all (given these alleged breaches of Michigan law), and that knowingly taking security deposits anyway constituted a pattern of federal wire, mail, and bank fraud. The Sixth Circuit affirmed dismissal, finding that the plaintiffs lacked standing to bring the RICO claim. The complaint failed to articulate any concrete injury; its allegations were too vague to meet the particularity requirement of fraud allegations under Civil Rule 9(b). View "Wall v. Michigan Rental" on Justia Law

The Internal Revenue Service classified Ballard, a securities broker, as a non-filer in 2008 and investigated. Ballard lied about his income, hid money in family members’ bank accounts, and filed then dismissed several Chapter 13 bankruptcy petitions, attempting to avoid paying $848,798 in taxes arising from his income between 2000 and 2008. He eventually pled guilty to violating 26 U.S.C. 7212(a), which prohibits “corruptly . . . obstruct[ing] or imped[ing] . . . administration of [the tax laws].” Ballard urged the court to use the U.S.S.G. for obstruction of justice. The district court rejected Ballard’s argument that he never intended to evade paying his taxes but was merely delaying the payments and used the tax evasion guideline to calculate a higher offense level and an increase in the sentencing range from eight–14 months to 24–30 months. Ballard was sentenced to 18 months’ incarceration. The Sixth Circuit affirmed. What matters in the choice between guidelines sections is which section is more precisely tailored to reflect offense characteristics—like tax evasion and tax loss—and which section covers a more closely related group of crimes. What Ballard did, and what the government charged, was a lie to the tax collector about his earnings. View "United States v. Ballard" on Justia Law

The accreditation of White’s travel agency, CTC, was revoked in 2003 after audits conducted by United Airlines uncovered fraudulent ticketing schemes that cost the airline $100,000 in airfares. White continued working as a subcontractor for other travel agencies and continued to obtain fraudulent ticket fares by providing false information about her clients’ ages, possession of discount certificates, and military status. White charged service fees and airfare directly to her clients’ credit cards, sometimes for persons other than those clients, and sometimes without their permission. When travel agencies violate an airline’s fare policy and cause financial loss, the airline issues Agency Debit Memoranda (ADM), requiring payment. A travel agent testified that within two years, his agency received more than $100,000 in ADMs based on airfare that White booked. When White was asked for proof that her customers qualified for military discounts, she created false Armed Forces Identification cards using customers’ real names and dates of birth. The airlines determined that the cards were fraudulent and notified the Secret Service. White was charged with wire fraud and aggravated identity theft. The district court permitted White to examine witnesses about actual repayments that were made to victims; White was not permitted to disclose loss-recoupment negotiations that took place long after White was confronted by her victims. White was sentenced to a total of 94 months in prison. The Sixth Circuit affirmed, rejecting arguments the district court read an improper definition of the term “use” into the aggravated identity theft statute; erred in refusing to admit evidence of White’s intention to repay some of the losses; and erred in calculating victims’ losses. View "United States v. White" on Justia Law

In Wayne County, Michigan, Grundy was Assistant County Executive; Executive Director of HealthChoice, a municipal corporation chartered to promote the health and welfare of area residents; and Division Director of the County’s Patient Care Management System, which administered its programs through ProCare Plus. Grundy’s friend, Griffin, formed businesses to provide advertising and electronic medical records services to HealthChoice and ProCare Plus. Griffin would inflate the price and “kickback” the excess to Grundy. According to the government, the benefit to Grundy totaled $1,381,766. He pleaded guilty to honest services wire fraud arising from one of his three schemes, 18 U.S.C. 1343 & 1346, waiving the right to appeal if “the sentence imposed does not exceed the 210-month maximum allowed by” the agreement, which was the top end of the Guidelines range proposed by the government based on the loss associated with his conduct. Grundy proposed a range of 37-46 months, arguing that the loss amount associated with his offense of conviction was $400,000. The court imposed a 90-month term. The government obtained a restitution order for $1,380,767; Grundy argued that restitution should be capped at the $400,000 associated with the offense of conviction. The Sixth Circuit dismissed an appeal, holding that the waiver applied to the restitution order. View "United States v. Michael Grundy" on Justia Law

For six decades, the Fair family operated Fair Finance Company in Ohio. In 2002, Durham and Cochran purchased the Company in a leveraged buyout and transformed its factoring operation into a front for a Ponzi scheme, to fund their extravagant lifestyles and struggling business ventures. Textron allegedly assisted in the concealment and perpetuation of the Ponzi scheme. In 2009, the scheme collapsed. Durham, Cochran, and the Company’s CFO, were indicted for wire fraud, securities fraud, and conspiracy. The Company entered involuntary bankruptcy. The Chapter 7 Trustee brought adversary proceedings on behalf of the estate for the Ponzi scheme’s unwitting investors. The district court granted Textron’s motion to dismiss. The Sixth Circuit reversed with respect to a claimed actual fraudulent transfer, holding that the Trustee sufficiently alleged facts to demonstrate an ambiguity in a 2004 financing and funding contract between the Company and Textron. The court held that the Trustee was not required to plead facts in anticipation of Textron’s potential in pari delicto affirmative defense to survive a motion to dismiss a civil conspiracy claim. In light of the reinstatement of those claims, the court reversed the dismissal of equitable subordination and disallowance claims. The court affirmed the dismissal of the Trustee’s constructive fraudulent transfer claim as time barred. View "Bash v. Textron Fin. Corp." on Justia Law

Sawyer, with co-defendants, formed A&E to recover salvageable materials (copper, steel, aluminum) from the 300-acre Hamblen County site of the former Liberty Fibers rayon plant, which contained buildings, a water treatment facility, and extensive above-ground piping. The defendants knew that many of the buildings contained regulated asbestos-containing material (RACM), such as pipe-wrap, insulation, roofing, and floor tiles, much of which was marked. Demolition did not comply with National Emission Standards for Hazardous Air Pollutants (NESHAP) governing the handling and disposal of asbestos. Workers were not provided with proper respirators or protective suits; some were asked to remove or handle friable asbestos without adequately wetting it. In a 2008 consent agreement, A&E agreed to correct the violations and comply with NESHAP during future removal and demolition. In 2009, the EPA terminated the agreement and issued an immediate compliance order. Federal agents searched the site, seized documents, and took samples of RACM. EPA, acting under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), cleaned up the site, at a cost of $16,265,418. In 2011, Sawyer and his co-defendants were charged. Sawyer pled guilty to conspiring to violate the Clean Air Act, 18 U.S.C. 371. His PSR calculated a guideline sentencing range of 87-108 months. The statutory maximum under 18 U.S.C. 371 is 60 months, so his effective range was 60 months. The Sixth Circuit affirmed Sawyer’s 60-month sentence and an order holding the co-defendants jointly and severally liable for $10,388,576.71 in restitution to the EPA. View "United States v. Sawyer" on Justia Law

Bankston was charged wire fraud, mail fraud, bank fraud, money laundering, identity theft, and a false statement offense in connection with three separate fraudulent schemes. In each scheme, she unlawfully obtained the personal identification information of individuals and used it to defraud commercial banks and the state and federal government. Before trial, Bankston wrote a letter to the judge complaining of a disagreement with her attorney: Bankston wanted to present as a defense her theory that evidence recovered from her home had been planted by a federal agent. Based on the letter, Count 23 charged Bankston with making false statements in matters within the jurisdiction of the judiciary, 18 U.S.C. 1001. The Sixth Circuit vacated her Count 23 conviction and remanded for resentencing, affirming her other convictions, despite claims of insufficient evidence, judicial bias, prosecutorial misconduct, ineffective assistance, and invalid waiver of counsel. Bankston’s Count 23 conduct did not clearly constitute a crime: “judicial function exception” applies when the defendant was a party to a judicial proceeding, his statements were submitted to a judge, and his statements were made in that proceeding. View "United States v. Bankston" on Justia Law

In 2009, Patel opened a pharmacy in the building where Dr. Fowler’s clinic operated and hired Shah as the manager. Shah paid Fowler to write prescriptions and send patients to Patel’s pharmacy. Patel introduced Fowler to Taylor, a “marketer” who would bring additional patients to Fowler’s clinic. Thoran, another marketer, would visit Patel’s pharmacy, to pick up prescriptions for 5-10 patients several times per week. The fraudulent prescriptions were resold on the street. Fowler and Thoran were convicted of conspiracy to commit healthcare fraud, conspiracy to distribute controlled substances, and conspiracy to pay or receive health-care kickbacks. During Fowler’s sentencing hearing, the district court failed to calculate the Guidelines range and failed to make findings about why the sentence that served as its “starting point” was appropriate. At Thoran’s sentencing hearing, the court agreed to the parties’ stipulated Guidelines range without making any findings about why it was appropriate. The court relied on erroneous factual findings in determining the restitution amount for each defendant and sentenced Fowler to 72 months’ imprisonment and payment of restitution of $1,752,957. Thoran’s sentence was 108 months with restitution of $2,632,854. The Sixth Circuit vacated the sentences and restitution orders, but affirmed Thoran’s convictions. View "United States v. Thoran" on Justia Law