Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Sixth Circuit
by
A Romanian organization, the Alexandria Online Auction Fraud Network (AOAF), used fraudulent online advertisements on websites like eBay, Craigslist, and Amazon to convince unknowing U.S. purchasers to send payments for high-value items that did not actually exist. After receiving the payments through vehicles like gift cards and prepaid debit cards, AOAF money launderers in the U.S., including Brown, converted the payments into Bitcoin currency, which was then transferred back to Romania. Foreign Bitcoin exchange businesses including RG, Iossifov’s Bulgaria-based business, then transferred the Bitcoin balances to cash on behalf of AOAF fraudsters. About 900 victims never received the items for which they paid. The government learned about the scheme in 2014 when it discovered that an American citizen living in Kentucky was laundering funds on behalf of an online fraud organization; the individual became a confidential source.The Sixth Circuit affirmed Iossifov and Brown’s convictions and sentences under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(d), and Iossifov’s additional conviction for conspiring to launder money 18 U.S.C. 1956(h). The court rejected venue, jurisdiction, and Due Process claims, a contention that Bitcoin does not fall under the money laundering statute, and challenges to sentencing enhancements and evidentiary rulings. View "United States v. Iossifov" on Justia Law

by
The 2008 financial crisis caused GM and Chrysler into bankruptcy. In Europe, Fiat faced similar troubles. Fiat CEO Marchionne forged a relationship with the United Auto Workers (UAW). Fiat negotiated a partial purchase of Chrysler. Chrysler and the UAW agreed to Marchionne’s request to jettison certain traditional union protections. The companies emerged from bankruptcy with the UAW large percentages of their equity.GM alleges that Marchionne subsequently implemented a bribery scheme to revive Chrysler and harm GM. Fiat acquired the UAW’s stake in Chrysler. The new entity, “FCA,” allegedly “began a long-running intentional scheme of improper payments" to UAW officials … to influence the collective bargaining process, providing Chrysler with labor peace and competitive advantages. GM rejected Marchionne's proposal for a merger in 2015; although bribed UAW executives pressed GM to agree. During subsequent collective bargaining, the UAW and FCA allegedly conspired “to force enormous costs on GM.”In 2017, the Justice Department criminally charged numerous FCA executives and UAW officials. Several entered guilty pleas. FCA pleaded guilty and agreed to a $30 million fine. The UAW agreed to a consent decree, requiring federal monitoring.GM sued FCA, Fiat, and individuals, asserting RICO claims, 18 U.S.C. 1962(b), (c), and (d). The district court dismissed. Assuming that FCA committed RICO violations, they were either indirect or too remote to have proximately caused GM’s alleged injuries. The Sixth Circuit affirmed, first rejecting an argument that the NLRB had exclusive jurisdiction. The court noted the existence of a more “immediate victim,” the FCA workers, “better situated to sue.” GM has not alleged that it would have received the same benefits as FCA absent the corruption. View "General Motors, LLC v. FCA US, LLC" on Justia Law

by
Inman was part of the majority of the Michigan House of Representatives who, along with a majority of the Senate, voted to repeal the prevailing-wage law. Inman was charged with soliciting bribes for his prevailing-wage vote: attempted extortion under color of official right, 18 U.S.C. 1951; soliciting a bribe, 18 U.S.C. 666(a)(1)(B); and making a false statement to the FBI, 18 U.S.C. 1001(a)(2) (Count III). A jury acquitted Inman on Count III but hung on Counts I and II. The district court dismissed those counts, concluding that the acquittal precluded a retrial on the other counts.The Sixth Circuit reversed. The acquittal on the false-statement charge did not decide any fact that necessarily precludes a verdict against Inman on the extortion and bribery-solicitation charges, so issue preclusion does not apply. To show the underlying corrupt agreement, the prosecution did not need to produce evidence that Inman lied to the FBI. It needed to produce evidence that Inman extorted or attempted to solicit an agreement where Inman would vote on the prevailing-wage law in exchange for payment. At retrial, a jury must decide whether Inman actually extorted or attempted to solicit such an agreement—a question not answered by the acquittal on Count III. View "United States v. Larry Inman" on Justia Law

by
VanDemark owns the Used Car Supermarket, which sells cars from two lots in Amelia, Ohio. In 2013-2014, VanDemark funneled away his customers’ down payments and left them off his tax returns. He used this stashed-away cash to finance the mortgage on his mansion.The Sixth Circuit affirmed VanDemark’s convictions for helping prepare false tax returns, 26 U.S.C. 7206(2), structuring payments, 31 U.S.C. 5324(a)(3), and making false statements to federal agents, 18 U.S.C. 1001. The down payments were taxable upon receipt, not, as VanDemark argued, when customers purchased the cars after leasing them. With respect to his missing 2013 personal return, the court stated that a defendant is guilty even if he helps prepare, without presenting, the fraudulent return. View "United States v. VanDemark" on Justia Law

by
Zheng became a permanent U.S. resident in 2004. He was a professor at the University of Southern California, Pennsylvania State University, and The Ohio State University and performed research under National Institute of Health (NIH) grants. Zheng had financial and information-sharing ties to Chinese organizations and received grants from the National Natural Science Foundation of China. Including that information on NIH applications would have derailed Zheng’s funding prospects, so Zheng clouded his ties to China. By 2019, the FBI began investigating Zheng. Zheng left for China but federal agents apprehended him in Anchorage.Zheng pleaded guilty to making false statements, 18 U.S.C. 1001(a)(3). Rejecting an argument that the research Zheng completed offset the amount of money lost, the district court calculated a Guidelines range of 37-46 months and sentenced Zheng to 37 months. On appeal, Zheng argued that his counsel was ineffective by not seeking a downward variance based on Zheng’s immigration status as a deportable alien, which would have an impact on the execution of his sentence. The Sixth Circuit dismissed, noting that the record was inadequate to establish ineffective assistance for the first time on direct appeal. Nothing in the record shows counsel’s reasons for making certain strategic decisions or why he advanced one argument over another. View "United States v. Zheng" on Justia Law

by
Doctors Hills, Alqsous, Elrawy, and Al-Madani were convicted of offenses connected to their employment at a publicly-owned Cuyahoga County hospital, MetroHealth, which receives federal funds. Hills solicited and received bribes from Alqsous, Al-Madani, and Elrawy in exchange for favorable treatment with respect to their employment. Alqsous, Al-Madani, and Sayegh solicited and/or accepted bribes from applicants to MetroHealth’s dental residency program. Hills and an unindicted business partner operated OHE to provide training for dentists with discipline or performance issues. Some of OHE’s business was accomplished using MetroHealth personnel, equipment, or facilities without permission or compensation. Hills received and Alqsous and Al-Madani offered or paid kickbacks for referrals to private clinics. There were recordings of discussions concerning warning a resident to stay quiet, preparing 1099 forms to hide the kickbacks, and telling a grand jury witness to “forget” seeing envelopes of cash. Hills also arranged for his attorney to receive extensive dental work without charge and assigned MetroHealth residents to work at a private clinic.The district court imposed aggregate terms of imprisonment of: 188 months (Hills), 151 months (Alqsous), and 121 months (Al-Madani). They were also ordered to pay restitution, some jointly and severally, in amounts approaching $1 million. The Sixth Circuit affirmed, rejecting challenges to the sentences, the loss calculation, the sufficiency of the evidence, the jury instructions, the denial of a motion to suppress, and other procedural rulings. View "United States v. Alqsous" on Justia Law

by
Lexington solicited bids for relocating its city offices, including one from CRM, a local real estate development firm. Wellman was an executive at CRM. While the committee deliberated on the CRM proposal, two City Council members began receiving campaign contributions from CRM employees. These actions prompted an investigation under 18 U.S.C. 666, which prohibits “federal funds bribery.” Agents suspected a straw contribution scheme arranged by Wellman and funded by CRM. Wellman falsified documents and cajoled his straw contributors to lie. Prosecutors opened a separate grand jury inquiry into potential obstruction charges against Wellman.Wellman was convicted on 11 federal charges, including obstruction of an official proceeding and aiding and abetting numerous associates to make false statements to the FBI, and was sentenced to a year and a day in prison with a $10,000 fine. The district court applied a two-level obstruction of justice enhancement under U.S.S.G. 3C1.1 but ultimately varied downward based on Wellman’s character and service to the community. The Sixth Circuit affirmed, rejecting challenges to the sufficiency of the evidence and Wellman’s argument that, at most, he obstructed an investigation into violations of Kentucky campaign finance laws, not federal bribery. A reasonable jury could conclude that Wellman corruptly obstructed, influenced, or impeded a federal grand jury proceeding. View "United States v. Wellman" on Justia Law

by
Nicolescu, Miclaus, and coconspirators posted fake eBay car auctions. Operating from Romania, they concealed their IP addresses, and employed US-based “money mules,” to collect payments from unsuspecting buyers, taking in $3.5-$4.5 million. In 2014, a virus created by Nicolescu was embedded in the eBay auctions and in spam emails to collect more than 70,000 account credentials, including 25,000 stolen credit-card numbers. Their network of virus-infected computers “mined” for cryptocurrency, reaping $10,000–$40,000 per month, 2014-2016. The FBI and Romanian police executed a search warrant on members’ residences and retrieved electronic devices. Nicolescu and Miclaus were convicted of conspiracy to commit wire fraud, 12 counts of wire fraud, conspiracy to commit computer fraud, conspiracy to traffic in counterfeit service marks, five counts of aggravated identity theft, and conspiracy to commit money laundering.The district court added 18 levels to their Guidelines calculation (U.S.S.G. 2B1.1(b)(1)(J)) for causing a loss of $3.5-$9.5 million, two levels (2B1.1(b)(4)) for being in the business of receiving and selling stolen property, two levels (2B1.1(b)(11)(B)(i)) for trafficking unauthorized access devices, four levels (2B1.1(b)(19)(A)(ii)) for being convicted under 18 U.S.C. 1030(a)(5)(A), and four levels (3B1.1(a)) for being an organizer or leader. They were sentenced to 216 and 240 months’ imprisonment.The Sixth Circuit affirmed the convictions, rejecting challenges to the sufficiency of the evidence and to jury instructions, but vacated the sentences. The court upheld the loss calculation and leadership enhancement. The court erred in applying the stolen property enhancement and in applying a 2B1.1(b)(19)(A)(ii) enhancement because the men were convicted of conspiracy, not a substantive section 1030(a)(5)(A) offense. View "United States v. Miclaus" on Justia Law

by
Based on activity related to former Kentucky Secretary of State Alison Lundergan Grimes’ campaign for the U.S. Senate seat held by Mitch McConnell in 2014, Emmons and Lundergan (Grimes’s father) were convicted for knowingly and willfully making unlawful corporate contributions aggregating $25,000 or more, Federal Election Campaign Act, 52 U.S.C. 30109(d)(1)(A)(i), 30118, and 18 U.S.C. 2; conspiracy to defraud the United States, 18 U.S.C. 371; willfully causing the submission of materially false statements, 18 U.S.C 1001(a)(2) and 2; and the falsification of records or documents, 18 U.S.C. 1519 and 2.The Sixth Circuit affirmed, rejecting a challenge to the constitutionality of the ban on corporate contributions as applied to intrafamilial contributions from a closely-held, family-run corporation. Such contributions present a risk of quid pro quo corruption. The district court adequately distinguished between independent expenditures and contributions in the jury instructions. The district court properly admitted evidence of Lundergan’s uncharged acts in connection with Grimes’ campaigns for Kentucky Secretary of State as res gestae evidence and under 404(b). The government presented sufficient evidence for a rational juror to find that Emmons had the requisite intent to cause unlawful corporate contributions and the Grimes campaign to submit false campaign-finance reports. View "United States v. Emmons" on Justia Law

by
The IRS began a criminal investigation of Gaetano, who owns Michigan cannabis dispensaries. Portal 42, a software company that provides the cannabis industry with point-of-sale systems, confirmed that Gaetano was a client. Agents served a summons, ordering Portal 42 to produce records “and other data relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning [Gaetano] for the periods shown.” The IRS did not notify Gaetano about the summons. Portal 42 sent the IRS an email with a hyperlink to the requested records. An IRS computer specialist copied the documents. None of the personnel in the IRS’s Criminal Investigation Division have viewed the records.Gaetano filed a petition under 26 U.S.C. 7609, seeking to quash the summons, arguing that the IRS should have notified Gaetano about the summons and that it was issued in bad faith. The Sixth Circuit affirmed the dismissal of the action for lack of subject-matter jurisdiction because Gaetano lacked standing. Section 7609 waives the government’s sovereign immunity to allow taxpayers to bring an action to quash certain third-party IRS summonses. An exception applies because the summons here was issued by an IRS criminal investigator “in connection” with an IRS criminal investigation and the summoned party is not a third-party recordkeeper. Without a statutory waiver of sovereign immunity, subject-matter jurisdiction cannot obtain. View "Gaetano v. United States" on Justia Law