Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit

by
Segal was convicted in 2004 of racketeering, mail and wire fraud, making false statements, embezzlement, and conspiring to interfere with operations of the IRS. His company, NNIB, was convicted of mail fraud, making false statements, and embezzlement. Segal and his wife, Joy, divorced after his conviction. After Segal served prison time, he was ordered to forfeit $15 million and his interest in NNIB. NNIB was ordered to pay restitution and a fine. The government initially restrained $47 million worth of assets of Segal and NNIB. Joy intervened and settled her claims with the government, which released to her about $7.7 million in restrained assets. Joy relinquished all further claims—save one contingent future interest. Liquidation proceedings continue. Segal and the government agreed on a court-approved settlement that fulfilled Segal’s $15 million personal forfeiture obligation. Segal later sought to rescind or modify that agreement. The district court denied his attempt and denied Joy’s attempt to intervene in the liquidation proceedings because her contingent future interest is not yet ripe. The Seventh Circuit affirmed. The court rejected Michael’s unconscionability argument, noting that he previously won strict enforcement of the settlement agreement, preserving his right to repurchase an interest in the Chicago Bulls. He is judicially estopped from pursuing this challenge. The court also rejected a “windfall” argument and, noting the number of appeals, stated that if there are further proceedings, the parties and their counsel will be subject to Rule 11. View "United States v. Segal" on Justia Law

by
U.S. Customs Officer Parra spent December 8, 2010 “cracking open containers” at a warehouse near the Los Angeles seaport. Opening one from South Korea to inspect its freight, Parra found a fully assembled, five-foot-tall industrial turbo blower. A placard riveted to the side read, “Assembled in USA.” The discovery led to a federal investigation that traced back to Lee. Prosecutors charged Lee with executing a scheme to defraud local governments by falsely representing that his company manufactured its turbo blowers in the U.S. The Seventh Circuit affirmed his wire fraud convictions, reasoning that Lee’s misrepresentations were material under the American Recovery and Reinvestment Act, 123 Stat. 115 (2009), which includes a “Buy American” provision. The evidence adequately supports Lee’s participation in a scheme to defraud and his intent to do so. Lee used interstate wires as a part of that scheme. The indictment afforded Lee ample notice of the case the government presented at trial and included specific details of the crimes alleged to avoid double jeopardy risk; no impermissible constructive amendment or variance occurred. The court also upheld Lee’s smuggling convictions under 18 U.S.C. 545. The mislabeling served an important function in Lee’s broader scheme to deceive customers about the origin of the turbo blowers. View "United States v. Lee" on Justia Law

by
Posada, a licensed chiropractor, owned and operated Spine Clinics, a Medicare-enrolled provider. Posada was indicted for a scheme to defraud Medicare and other insurers by submitting fraudulent claims and falsely representing that certain health care services were provided. The prosecution presented evidence that Posada billed the insurers for deceased patients and services never performed, created fake files, and failed to document the actual services rendered. Witnesses from Medicare and an insurer testified regarding the thousands of claims submitted. Two physical therapists also testified about the services they performed for Spine Clinics, how they billed Posada, and that they never performed many of the services for which he charged. Convicted of 18 counts of health care fraud, Posada’s PSR indicated an offense level of 26, based on a $4,087,736 loss amount, and recommended a term of incarceration of 63-78 months. To calculate that amount the prosecution reviewed Spine Clinic's files and when no treatment documentation was present, the amount billed was treated as a loss. The prosecution credited Posada with treating 20 patients a day, three days a week every week during the period of the fraud. Posada argued for an estimate of 25-26 patients per day and a loss amount less than $3.5 million. The district court accepted the government’s calculation and found a loss amount of $4,087,736. The Seventh Circuit affirmed that amount and Posada’s 60-month sentence, noting that the calculation was supported by the evidence at trial. View "United States v. Posada" on Justia Law

by
Harmelech pled guilty to one count of mail fraud, 18 U.S.C. 1341; the government dismissed the remaining count. Harmelech, who owned and operated multiple cable installation companies, admitted to setting up about 384 DIRECTV accounts under a fraudulent scheme that involved multi-family buildings. He pocketed money that should have been paid for servicing those accounts for six years. Harmelech involved several employees in his scheme and attempted to prevent DIRECTV from discovering his scheme by instructing the building managers not to cooperate in an investigation. At sentencing, Harmelech claimed his scheme actually benefited the company by bringing in additional business. The district court adopted the government’ loss calculation and found Harmelech owed: $108,000 in account delinquencies; $39,000 in unrecovered DIRECTV receivers; and $29,600 in promotional customer credits; $166,0001 for stolen channels and $35,000 for the price DIRECTV paid for its internal investigation. The court ordered $372,600 in restitution, assessed a four-level sentencing enhancement for Harmelech’s role as the organizer and leader of an otherwise extensive fraudulent scheme U.S.S.G. 3B1.1(a), and sentenced Harmelech to 48 months’ imprisonment. The Seventh Circuit affirmed. The district court’s loss calculation was concrete, specific, conservative in its results, and consistent with Seventh Circuit precedent. View "United States v. Harmelech" on Justia Law

by
Fennell took kickbacks while employed as facilities and transportation director for Indiana’s Vigo County School Corporation. The evidence showed an actual loss amount of $110,600 in kickbacks that he and a codefendant received for steering government contracts to a favored bidder. The presentence investigation report recited that amount as restitution, which the district court imposed, but the court referred to that amount orally as the “intended” loss. Fennell sought a remand, arguing that 18 U.S.C. 3664(a) requires that the presentence report contain its own detailed accounting rather than incorporate the trial evidence by reference and that the district court erred by imposing restitution for the intended loss instead of actual loss. The Seventh Circuit affirmed. There was no plain error in the district court’s restitution calculation, and despite the mistaken oral reference to an intended loss, the record showed beyond reasonable dispute that the amount awarded was the victim’s actual loss. View "United States v. Fennell" on Justia Law

by
Dr. Sheth, a cardiologist, admitted in a plea agreement that he engaged in a scheme to overbill government and private insurers by approximately $13 million, in violation of 18 U.S.C. 1347. The scheme resulted in a loss to Medicare of about $9 million in payments for services Sheth did not render between 2002 and 2007, and a loss of about $4 million to private healthcare insurers for the same conduct. After the government detected the fraud, in June 2007, it initiated an administrative proceeding and seized funds from four Harris Bank accounts that the government believed were the proceeds of Sheth’s fraud. In his plea, Sheth agreed to forfeit $13 million in assets; the government would apply the proceeds of the forfeited property to any restitution judgment resulting from his conviction. Sheth disputed the valuation of some of the property applied to the restitution judgment. The Seventh Circuit affirmed the district court’s decision as to the valuation of Seth’s real property but remanded for consideration of the application of $225,000 in interest that had accrued on the Harris accounts to the restitution judgment. View "United States v. Sheth" on Justia Law

by
Freed was the president and CEO of JFA, a real estate development company, and created and managed several real estate ventures including UGV. In 2002, UGV secured Chicago tax increment financing (TIF) for an Uptown development. The city issued a redevelopment note for $4.3 million and project note for $2.4 million. UGV was required to annually it was not in default on any loans and had not entered into any transactions that would harm its ability to meet its financial obligations. Freed thereafter obtained loans and allowed them to become double-pledged and go into default. He made false statements to obtain loan modifications. In annual requisition forms Freed provided the city under the TIF agreement, Freed claimed none of his entities were in default. The Seventh Circuit affirmed Freed’s convictions for bank fraud (18 U.S.C. 1344); mail fraud (18 U.S.C. 1341); wire fraud (18 U.S.C. 1343); and making false statements to a financial institution (18 U.S.C. 1014), rejecting arguments that two jury instructions, concerning "aiding and abetting" and "wilfully causing" were incorrect and there was insufficient evidence for several of his convictions. View "United States v. Freed" on Justia Law

by
Patel pleaded guilty to five counts of wire fraud, 18 U.S.C. 1343, for his role in selling $179 million in fraudulent loans to an investment advisor. Patel delayed his sentencing date for a year while he purported to help recover funds for his victims. While on bond, just days before he was to be sentenced, Patel attempted to flee the U.S. and seek political asylum elsewhere. Agents arrested him just before he boarded a chartered flight to Ecuador. The government discovered that while on bond, instead of earning money for his victims through consulting fees and redevelopment projects, Patel and another used fictitious identities and entities to defraud an Iowa lender out of millions of dollars. Approximately $2.2 million of the money Patel had ostensibly earned for the fraud victims was newly‐stolen money. The court imposed a below-guidelines sentence of 25 years’ imprisonment. The Seventh Circuit affirmed the sentence as procedurally and substantively reasonable. Patel made a disparity argument, the government had the opportunity to respond, and the court addressed it on the record; nothing more is required. The court’s comments regarding Patel’s psychological state and motivations relate to factors that a court must consider at sentencing, 18 U.S.C. 3553(a)(1), (2)(A). There is no indication that the court “did not like” him and sentenced him inappropriately as a result. View "United States v. Patel" on Justia Law

by
Tantchev, a native of Bulgaria, owned a trucking business that operated out of a warehouse in Chicago. Chogsom, a Mongolian immigrant, worked for Tantchev. Large deposits into Tantchev’s bank account prompted an investigation. After a six-day trial involving 29 witnesses, a federal jury convicted Tantchev of exporting and attempting to export stolen cars, submitting false documents to customs officials, and structuring financial transactions to avoid federal reporting requirements. That same jury acquitted Tantchev’s co-defendant, Chogsom, of charges related to the stolen cars and false documents, but convicted Chogsom of making a false statement to an IRS agent. The district court sentenced Tantchev to 40 months’ imprisonment and Chogsom to three years’ probation. The Seventh Circuit affirmed. The court rejected Tantchev’s argument that the district court should not have given a deliberate avoidance or “ostrich” instruction. The jury was entitled to conclude Tantchev purposely did not subject the shipping containers to the scrutiny he exercised in the other part of his business and draw a negative inference from that change in behavior. The court upheld the use of a jury instruction, “If you find that the defendant was in possession of property that recently had been stolen, you may infer that he knew it was stolen.” View "United States v. Chogsom" on Justia Law

by
From 2002-2008 Boliaux operated EMC, a used-car dealership. He borrowed money. Most loans were secured by the cars’ certificates of title. Because there should be only one title certificate per car, the dealer cannot transfer good title to a customer without paying the lender. In 2007 Boliaux persuaded state officials to issue duplicate certificates of title on the pretense that the originals had been lost. He obtained multiple loans against single vehicles, exceeding the cars’ market value and leaving the lenders under-secured. He sold cars without repaying the loans. After a lender detected this and impounded the collateral, Boliaux persuaded the custodian to release eight cars, which he sold for his own benefit. In 2008, Boliaux’s wife incorporated Joliet Motors, which Boliaux operated from the former EMC premises. Joliet Motors received installment payments from EMC customers but did not remit them to lenders. Boliaux began check kiting. He was convicted of four counts of wire fraud and six of bank fraud, 18 U.S.C. 1343, 1344, and sentenced to 48 months’ imprisonment. The Seventh Circuit affirmed, rejecting arguments that the evidence was insufficient on the wire fraud counts because he did not transmit anything by wire, and on the bank fraud counts because no one from the banks testified that the banks lost money. The district judge properly declined to instruct the jury that it had to agree, unanimously, how Boliaux carried out his scheme. View "United States v. Boliaux" on Justia Law