Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Second Circuit
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The American subsidiary of Alstom Power, Inc. (“API”), a global power and transportation services company, hired two consultants to bribe Indonesian officials to help secure a $118 million power contract. Defendant, who worked in Paris for API’s United Kingdom subsidiary, was allegedly responsible for approving the selection of the consultants and authorizing payments to them. For his role in the alleged bribery scheme, Defendant was charged in an American court with (among other things) violating the Foreign Corrupt Practices Act  (“FCPA”), which makes it unlawful for officers, directors, and agents “of a domestic concern” to use interstate commerce corruptly to bribe or attempt to bribe foreign officials. Defendant appealed. Defendant moved for acquittal, arguing he was not an agent within the meaning of the FCPA. The district court granted that motion; the government appealed and Defendant cross-appealed.The Second Circuit affirmed the district court’s ruling holding that the district court properly acquitted Defendant under Rule 29 because there was no agency or employee relationship between Defendant and API. The court also affirmed on the cross‐appeal, finding no error in either the district court’s speedy trial analysis or its jury instructions.     The court explained that while there is some evidence that Defendant supported API in his working relationship with the corporation, it is not sufficient to establish that API exercised control over the scope and duration of its relationship with Defendant. Further, the district court’s analysis of the Barker factors and dismissal of Defendant’s Sixth Amendment claim falls “within the range of permissible decisions. View "United States v. Hoskins" on Justia Law

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The Mandatory Victims Restitution Act requires defendants convicted of certain crimes to reimburse their victims for “lost income and necessary child care, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense,” 18 U.S.C. 3663A(b)(4). The Second Circuit previously held that “other expenses” could include attorneys’ fees incurred by victims while helping the government investigate and prosecute the defendant and costs incurred while privately investigating the defendant. The Supreme Court subsequently held that “the words ‘investigation’ and ‘proceedings’ are limited to government investigations and criminal proceedings.”Afriyie was convicted of securities fraud after trading on inside information he misappropriated from his employer, MSD. The district court entered the restitution order, covering the fees MSD paid its law firm to guide MSD’s compliance with investigations by the U.S. Attorney’s Office and the SEC; to help prepare four MSD witnesses to testify at Afriyie’s criminal trial; and to represent MSD during the post-verdict restitution proceedings.The Second Circuit held that attorneys’ fees can sometimes be “other expenses” but a victim cannot recover expenses incurred while participating in an SEC investigation. Restitution is appropriate only for expenses associated with criminal matters; civil matters, including SEC investigations, even if closely related to a criminal case do not qualify. View "United States v. Afriyie" on Justia Law

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The Second Circuit reversed defendants' convictions for wire fraud in violation of 18 U.S.C. 1343 and conspiracy to commit wire fraud and bank fraud in violation of 18 U.S.C. 1349, in connection with the London Interbank Offered Rate (LIBOR).The court concluded that the evidence was insufficient to prove that defendants caused DB to make LIBOR submissions that were false or deceptive, i.e., to prove that they engaged in conduct that was within the scope of section 1343. In this case, the government failed to produce any evidence that any DB LIBOR submissions that were influenced by the bank's derivatives traders were not rates at which DB could request, receive offers, and accept loans in DB's typical loan amounts. Therefore, the government failed to show that any of the trader-influenced submissions were false, fraudulent, or misleading. Furthermore, the government's failure to prove that the LIBOR submissions did not comply with the BBA LIBOR Instruction and were false or misleading means it failed to prove conduct that was within the scope of the statute prohibiting wire fraud schemes. The court need not reach defendants' other contentions and the government's cross-appeals as to sentencing are moot. View "United States v. Connolly" on Justia Law

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Plaintiffs filed suit for fraud, rescission, conspiracy, aiding and abetting, fraudulent conveyance, and unjust enrichment alleging that defendants had misrepresented that collateral managers would exercise independence in selecting assets for collateralized debt obligations (CDOs). The district court granted summary judgment in favor of defendants.The Second Circuit affirmed and held that plaintiffs have failed to establish, by clear and convincing evidence, reliance on defendants' representations. In this case, plaintiffs based their investment decisions solely on the investment proposals their investment advisor developed; the advisor developed these detailed investment proposals based on offering materials defendants provided and on the advisor's own due diligence; plaintiffs premised their fraud claims on the advisor's reliance on defendants' representations; but New York law does not support this theory of third-party representations. The court also held that plaintiffs have failed to establish that defendants misrepresented or omitted material information for two of the three CDO deals at issue—the Octans II CDO and the Sagittarius CDO I. The court explained that defendants' representations that the collateral managers would exercise independence in selecting assets were not misrepresentations at all, and defendants did not have a duty to disclose their knowledge of the hedge fund's investment strategy because this information could have been discovered through the exercise of due care. View "Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo" on Justia Law

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Percoco, a longtime friend and top aide to former Governor Andrew Cuomo, accepted payment in exchange for promising to use his position to perform official actions. For one scheme, Percoco promised to further the interests of an energy company, CPV; for another, Percoco agreed with Aiello to advance the interests of Aiello’s real estate development company. Aiello was convicted of conspiracy to commit honest services wire fraud, 18 U.S.C. 1349. Percoco was convicted of both conspiracy to commit honest-services wire fraud and solicitation of bribes or gratuities, 18 U.S.C. 666(a)(1)(B). The court had instructed the jury that the quid-pro-quo element of the offenses would be satisfied if Percoco wrongfully “obtained . . . property . . . in exchange [for] official acts as the opportunities arose.”The Second Circuit affirmed. Although the as-opportunities-arise instruction fell short of a recently clarified standard, which requires that the honest-services fraud involve a commitment to take official action on a particular matter or question, that error was harmless. A person who is not technically employed by the government may nevertheless owe a fiduciary duty to the public if he dominates and controls governmental business, and is actually relied on by people in the government because of some special relationship. View "United States v. Percoco" on Justia Law

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Defendant pleaded guilty to conspiracy to commit securities fraud in violation of 18 U.S.C. 371. Defendant, as a broker-dealer in the over-the-counter securities market, executed fraudulent trades for a co-defendant client with the effect of artificially inflating the share price of a sham company, Cubed. While defendant was involved in that activity, his co-defendants arranged the sale of Cubed shares outside the public market in a private placement. The district court concluded that defendant was liable under the Mandatory Victims Restitution Act of 1996 for restitution, both to purchasers of Cubed shares in the public market (in the amount of $479,000) and to purchasers in the private placement (in the amount of $1.85 million).The Second Circuit reversed and remanded, agreeing with defendant that the Government did not show that the private placement losses are attributable to his offense of conviction, as the MVRA requires. The court explained that the MVRA authorizes restitution only for losses "directly and proximately" caused by a covered "offense" of conviction, 18 U.S.C. 3663A(a)(2), (c). This proximate cause element requires that the Government prove, by a preponderance of the evidence, that the losses for which restitution compensates were foreseeable to the defendant in the course of committing the offense of conviction. In this case, because the Government has not adduced sufficient evidence that the private placement losses were foreseeable to defendant during his participation in the conspiracy to manipulate the public share price of Cubed, the MVRA does not authorize the $1.85 million in restitution for these losses. View "United States v. Goodrich" on Justia Law

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Picard was appointed as the trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS) pursuant to the Securities Investor Protection Act, 15 U.S.C. 78aaa, to recover funds for victims of Bernard Madoff’s Ponzi scheme. SIPA empowers trustees to recover property transferred by the debtor where the transfers are void or voidable under the Bankruptcy Code, 11 U.S.C. 548, 550, to the extent those provisions are consistent with SIPA. Under Sections 548 and 550, a transferee may retain transfers it took “for value” and “in good faith.” Picard sued to recover payments the defendants received either directly or indirectly from BLMIS. The district court held that a lack of good faith in a SIPA liquidation requires that the defendant-transferee has acted with “willful blindness” and that the trustee bears the burden of pleading the transferee’s lack of good faith. Relying on the district court’s legal conclusions, the bankruptcy court dismissed the actions, finding Picard did not plausibly allege the defendants were willfully blind to the fraud at BLMIS.The Second Circuit vacated. Nothing in SIPA compels departure from the well-established rule that the defendant bears the burden of pleading an affirmative defense. The district court erred by holding that the trustee bears the burden of pleading a lack of good faith under Sections 548(c) and 550(b)(1). View "In Re Bernard L. Madoff Investment Securities, LLC" on Justia Law

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The Second Circuit affirmed defendant's conviction of bank fraud, making false statements in support of a passport application, and aggravated identity theft. Defendant argues that the district court erred by failing to grant her motion for an acquittal based on her failure to complete the passport application paperwork and swear an oath affirming to its veracity.The court agreed with the district court's determination that submitting a fraudulent passport application, even when unsigned and without swearing the required oath, satisfies the elements of 18 U.S.C. 1542. The court explained that defendant's argument that an oath and signature on the passport application form are required to establish criminal liability is not supported by the statute and regulations defining a passport application. Furthermore, the statute and regulations define a passport application as the submitted application form and supporting documents. Because submission occurs when a person provides a federal official with an application form and any supporting materials for review, and defendant acknowledged submission of a falsified application form to a passport officer, the district court did not err by failing to grant defendant's motion for acquittal. View "United States v. Gu" on Justia Law

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Defendant is a French banker who is charged with transmitting false, misleading, and knowingly inaccurate commodities reports, and with conspiracy to do the same, in violation of the Commodity Exchange Act (CEA). On appeal, defendant challenged the district court's application of the fugitive disentitlement doctrine and denial of her motions to dismiss the indictment.The Second Circuit concluded that it has jurisdiction to review the disentitlement ruling, but none to review the merits of extraterritoriality or due process. The court concluded that defendant is not a fugitive and, even if she were a fugitive, the district court abused its discretion in disentitling her. In this case, given her innocent residence as a foreign citizen abroad, given the nature of the charged offense and her remoteness from the alleged harm that it caused, given her line of work, and given her nonfrivolous challenge to the extraterritoriality of the criminal statute, the exercise of discretion to disentitle her was an abuse. Accordingly, the court reversed the order disentitling defendant and remanded for further proceedings to consider or reconsider the merits of her motions to dismiss. The court dismissed this appeal insofar as it seeks review of the (alternative) rulings on extraterritoriality and due process. View "United States v. Bescond" on Justia Law

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The Second Circuit followed the logical course charted by longstanding precedent to reach two conclusions with respect to 18 U.S.C. 666(a)(2): first, the "agent" of a federally funded organization need not have control over the federal funds, and the agent need not work in a specific program within the organization that uses those federal dollars; and second, the "business" of a federally funded organization need not be commercial in nature.The court affirmed Defendants Dawkins and Code's conviction for conspiracy to commit bribery in violation of 18 U.S.C. 371 and 666(a)(2), as well as Dawkins's conviction of substantive bribery in violation of section 666(a)(2). Defendants' convictions stemmed from their involvement in a scheme to bribe basketball coaches at NCAA Division I universities in exchange for the coaches' agreement to steer their student-athletes toward Dawkins's sports management company after leaving college and becoming professional basketball players.In this case, the court concluded that the superseding indictment properly alleged a violation of section 666(a)(2); the Government proved a violation of section 666(a)(2) where section 666(a)(2) does not require a nexus between the "agent" of a federally funded organization and the federal funds the organization receives, and the bribes paid by defendants to the university basketball coaches in exchange for influence exerted over student-athletes were "in connection" with a university's "business;" the statute is constitutional as applied to defendants; the district court did not abuse its discretion when making the challenged evidentiary rulings; and the district court made no reversible errors in providing the challenged jury instructions. View "United States v. Dawkins" on Justia Law