Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
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In 1999-2016, Wilkinson convinced approximately 30 people to invest $13.5 million in two hedge funds that he created. By 2008, Wilkinson lost the vast majority of their money. Wilkinson told them that the funds’ assets included a $12 million note with an Australian hedge fund, Pengana. The “Pengana Note” did not exist. Wilkinson provided fraudulent K-1 federal income tax forms showing that the investments had interest payments on the Pengana Note. To pay back suspicious investors, Wilkinson solicited about $3 million from new investors using private placement memoranda (PPMs) falsely saying that Wilkinson intended to use their investments “to trade a variety of stock indexes and options, futures, and options on futures on such stock indexes on a variety of national securities and futures exchanges.” In 2016, the Commodity Futures Trading Commission filed a civil enforcement action against Wilkinson, 7 U.S.C. 6p(1).Indicted under 18 U.S.C. 1341, 1343, Wilkinson pleaded guilty to wire fraud, admitting that he sent fraudulent K-1 forms and induced investment of $115,000 using fraudulent PPMs. The court applied a four-level enhancement because the offense “involved … a violation of commodities law and ... the defendant was … a commodity pool operator,” U.S.S.G. 2B1.1(b)(20)(B). Wilkinson argued that he did not qualify as a commodity pool operator because he traded only broad-based indexes like S&P 500 futures, which fit the Commodity Exchange Act’s definition of an “excluded commodity,” “not based … on the value of a narrow group of commodities.” The Seventh Circuit affirmed. Wilkinson’s plea agreement and PSR established that Wilkinson was a commodity pool operator. View "United States v. Wilkinson" on Justia Law

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In 2005-2007, Merchant purchased Michigan hotel properties from NRB and financed the purchases through NRB, using corporate entities as the buyers. Merchant sold interests in those entities to investors. The hotels had been appraised at inflated amounts and sold for about twice their fair values. When the corporate entities defaulted on their loan payments, NRB foreclosed in 2009. Merchant claimed that NRB’s executives colluded with an appraiser to sell overvalued real estate to unsuspecting purchasers, wait for default, foreclose, and then repeat the process.In 2010, an investor sued Merchant, Merchant’s companies, NRB, and 12 others for investor fraud. In 2014 the FDIC took NRB into receivership and substituted for NRB as a defendant. Merchant and his companies brought a cross-complaint, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and state laws. A Fifth Amended Cross-Complaint raised 14 counts against 10 defendants, including two law firms that provided NRB’s legal work. The district court dismissed several counts; others remain active.The Seventh Circuit affirmed the dismissal of claims against the law firms. The counts under state law are untimely under Illinois’s statute of repose. The cross-complaint effectively admits that one firm played no role in NRB’s alleged fraud perpetrated against Merchant in 2005-2007. The cross-complaint failed to allege that either law firm conducted or participated in the activities of a RICO enterprise; neither firm could be liable under 18 U.S.C. 1962(c). View "Muskegan Hotels, LLC v. Patel" on Justia Law

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Meza, deep in debt, fell for fraudulent international trading programs promising incredible profits. He then tricked people he knew into investing in these programs. The scam involved ridiculous promises. The district judge called the dupes “the most improbable victims” she had ever seen. Meza was acquitted on one count of wire fraud and acquitted on another The judge sentenced him to 19 months in prison and ordered him to pay $881,500 in restitution. The Seventh Circuit affirmed. The trial court adequately explained its reasons for aggregating losses and excluded all losses around the time of the wire supporting the acquitted count: $295,000. The sentencing hearing covered the misrepresentations and losses in detail. Meza’s restitution did not include unconvicted and acquitted conduct. View "United States v. Meza" on Justia Law

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Elmer owned and operated multiple healthcare-related companies including Pharmakon, a compounding pharmacy that mixes and distributes drugs—including potent opioids like morphine and fentanyl—to hospitals across the U.S.. Pharmakon conducted its own internal potency testing and contracted with a third party to perform additional testing to evaluate whether its compounded drugs had too little of the active ingredient (under-potent) or too much (over-potent). In 2014-2016, testing showed 134 instances of under- or over-potent drugs being distributed to customers. Elmer knew the drugs were dangerous. Rather than halting manufacturing or recalling past shipments, sales continued and led to the near-death of an infant. Elmer and Pharmakon lied to the FDA.Elmer was charged with conspiracy to defraud the FDA (18 U.S.C. 371); introducing adulterated drugs into interstate commerce (21 U.S.C. 331(a), 333(a)(1) & 351); and adulterating drugs being held for sale in interstate commerce (21 U.S.C. 331(k), 331(a)(1) & 351). Pharmakon employees, FDA inspectors, and Community Health Network medical staff testified that Elmer was aware of and directed the efforts to conceal out-of-specification test results from the FDA. The district court sentenced Elmer to 33 months’ imprisonment. The Seventh Circuit affirmed, rejecting challenges to rulings related to the evidence admitted at trial and Elmer’s sentence. The evidence before the jury overwhelmingly proved Elmer’s guilt. The sentence was more than reasonable given the gravity of Elmer’s crimes. View "United States v. Elmer" on Justia Law

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For about three years, Nulf, an Illinois licensed loan originator, and two co-defendants participated in a mortgage-fraud scheme, causing approximately $2.2 million in losses. Nulf was charged with bank fraud, 18 U.S.C. 1344, and making a false statement to a financial institution, 18 U.S.C. 1014. Each crime carries a 30-year maximum prison term. The government filed a superseding information charging Nulf with a single count of making a false statement to HUD, a misdemeanor punishable by up to one year in prison. 18 U.S.C. 1012. Nulf pleaded guilty to the misdemeanor; the government agreed to dismiss the felony charges. The one-year statutory maximum was the recommended sentence. The plea agreement included an appeal waiver. Sentenced to 12 months' imprisonment, Nulf claims that the judge interfered with her allocution, wrongly denied credit for acceptance of responsibility, and committed other sentencing mistakes, amounting to a miscarriage of justice, making the appeal waiver unenforceable.The Seventh Circuit dismissed the appeal, stating that it has not announced a general “miscarriage of justice” exception to the enforcement of appeal waivers. A narrow set of extraordinary circumstances can justify displacing an otherwise valid appeal waiver. Nulf’s case is far from extraordinary, so the appeal waiver is enforceable unless the underlying guilty plea was invalid. Nulf does not claim that her plea was unknowing or involuntary. View "United States v. Nulf" on Justia Law

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To keep his car dealership afloat, Friedman secured loans for fake buyers of a phony inventory of luxury cars. The dealership exported cars overseas, but kept many of the title certificates and used the names of friends, customers, and former employees to secure loans, usually without the person’s knowledge; the loan applications included false income information and forged signatures. The scheme resulted in a bank fraud conviction (18 U.S.C. 1344) and a 108‐month prison sentence.The Seventh Circuit affirmed. Rejecting a claim based on a conflict of interest concerning an attorney who had briefly represented both Friedman and a cooperating co-defendant, Bilis, the court stated that Friedman has not shown that any privileged communications were ever shared, let alone that any breach of privilege affected his trial. The court upheld “aiding and abetting” and “acting through another” jury instructions that tracked Seventh Circuit pattern instructions; rejected a challenge to the sufficiency of the evidence; rejected challenges to comments that, essentially, called on the jury to use common sense; and rejected challenges to sentencing enhancements. The court upheld the denial of a motion for a new trial that was based on “new evidence” concerning Bilis’s finances and upheld the loss calculation of $4,722,347 and an order of restitution in that amount. View "United States v. Friedman" on Justia Law

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Spring Hill owned a 240-apartment complex in a Chicago suburb. In 2007, the owner converted the apartments into condominiums and attempted to sell them. Ginsberg recruited several people to buy units in bulk, telling them they would not need to put their own money down and that he would pay them after the closings. The scheme was a fraud that consisted of multiple components and false statements to trick financial institutions into loaning nearly $5,000,000 for these transactions. The seller made payments through Ginsberg that the buyers should have made, which meant that the stated sales prices were shams, the loans were under-collateralized, and the “buyers” had nothing at stake. The seller paid Ginsberg about $1,200,000; Ginsberg used nearly $600,000 to make payments the buyers should have made, paid over $200,000 to the buyers and their relatives, and kept nearly $400,000 for himself. The loans ultimately went into default, causing the financial institutions significant losses.The Seventh Circuit affirmed Ginsberg’s bank fraud conviction, 18 U.S.C. 1344. The evidence was sufficient for the jury to conclude Ginsberg knew that the loan applications, real estate contracts, and settlement statements contained materially false information about the transactions, including the sales prices, the down payments, and Ginsberg's fees. The court rejected a challenge to the admission of testimony by a title company employee. View "United States v. Ginsberg" on Justia Law

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In 2006-2009,, Ghuman and Khan “flipped” 44 gas stations. Ghuman would recruit a buyer before they purchased the station. The buyers lacked the financial wherewithal to qualify loans. Ghuman and Khan's co-defendant, AEB loan officer Brahmbhatt, arranged loans based on fraudulent documentation. They also created false financial statements for the gas stations. Co-defendant Mehta, an accountant, prepared fictitious tax returns. The loans, which were guaranteed by the Small Business Administration, went into arrears. In 2008-2009 the SBA began auditing the AEB loans; the FBI began looking into suspected bank fraud. AEB ultimately incurred a loss in excess of $14 million.Khan cooperated and pled guilty to one count of bank fraud, 18 U.S.C. 1344, in connection with a $331,000 loan. Ghuman pleaded guilty to another count of bank fraud in connection with a $744,000 loan and to one count of filing a false tax return, 26 U.S.C. 7206. The district court denied Ghuman credit for acceptance of responsibility and imposed a below-Guidelines prison term of 66 months. The court ordered Khan to serve a 36-month prison term and ordered Ghuman to pay $11.8 million and Khan to pay $10.8 million in restitution. The Seventh Circuit affirmed the sentences with an adjustment to Ghuman’s term of supervised release. View "United States v. Khan" on Justia Law

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Blake, who has an MBA, engaged in a fraudulent tax scheme but claims unnamed users in internet chat rooms persuaded him to pursue his hidden federal “legacy trusts.” Blake filed eight different individual tax returns using fraudulent information, at one point faking his own death. He was convicted of presenting a false or fictitious claim to a U.S. agency, 18 U.S.C. 287, and theft of government money, 18 U.S.C. 641. Blake’s base offense level was six; 16 levels were added for an intended loss in excess of $1.5 million (U.S.S.G. 2B1.1(b)(1)(I)). Two more levels were added for obstruction of justice (3C1.1). Blake’s guidelines range was 51–63 months' imprisonment. Blake objected to including in the loss calculation $900,000 in claimed refunds in the 2008–2010 filings, arguing he was not responsible for those filings. He also claimed $300,000 should be the intended loss amount because he intended to obtain only his “legacy trust” funds which he believed were about that amount. Under Blake’s calculations, his guidelines range was 33–41 months.The district court rejected his arguments. The Seventh Circuit affirmed his sentence of 36 months in prison plus restitution. The district court did not commit reversible error. Blake's ineffective assistance of counsel claim was dismissed without prejudice as “better raised on collateral review.” View "United States v. Blake" on Justia Law

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Kennedy-Robey was charged with fraud for operating a scheme to defraud the IRS and an unemployment insurance scheme. While awaiting trial, Kennedy-Robey was released on bond. She resumed her fraudulent activities. The government obtained an arrest warrant. Instead of appearing at the bond revocation hearing, Kennedy-Robey remained a fugitive for a few months. When they arrested Kennedy-Robey, officers found her to-do list, which read like a “how-to” guide for fugitives. Kennedy-Robey eventually pleaded guilty. Although the guidelines range was 210-262 months, the court sentenced her to 72 months’ imprisonment and ordered her to pay over $4.8 million in restitution.In 2017, Kennedy-Robey was released to a halfway house. Within weeks, Kenney-Robey filed a fraudulent automobile loan application and obtained a loan exceeding $30,000, which she used to purchase a Mercedes-Benz, and filed a fraudulent credit card application. Months later, she and another defendant purchased another car with funds obtained from another fraudulent loan application. Kennedy-Robey pleaded guilty to mail fraud, 18 U.S.C. 1341. The government sought an 18-month sentence, based on a guidelines range of 12-18 months. After considering Kennedy-Robey’s long history of unrepentant criminal conduct, the court imposed a 36-month sentence. The Seventh Circuit affirmed, rejecting arguments that the district court failed to consider either her mental health condition or the more lenient sentences received by defendants convicted of similar crimes and that the sentence was substantively unreasonable. View "United States v. Kennedy-Robey" on Justia Law