Justia White Collar Crime Opinion Summaries

A district court dismissed Plaintiff–Appellant Lawrence Smallen and Laura Smallen Revocable Living Trust’s securities-fraud class action against Defendant–Appellee The Western Union Company and several of its current and former executive officers (collectively, “Defendants”). Following the announcements of Western Union’s settlements with regulators in January 2017 and the subsequent drop in the price of the company’s stock shares, Plaintiff filed this lawsuit on behalf of itself and other similarly situated shareholders. In its complaint, Plaintiff alleged Defendants committed securities fraud by making false or materially misleading public statements between February 24, 2012, and May 2, 2017 regarding, among other things, Western Union’s compliance with anti-money laundering and anti-fraud laws. The district court dismissed the complaint because Plaintiff failed to adequately plead scienter under the heightened standard imposed by the Private Securities Litigation Reform Act of 1995 (“PSLRA”). While the Tenth Circuit found the complaint may have given rise to some plausible inference of culpability on Defendants' part, the Court concurred Plaintiff failed to plead particularized facts giving rise to the strong inference of scienter required to state a claim under the PSLRA, thus affirming dismissal. View "Smallen Revocable Living Trust v. Western Union Company" on Justia Law

This case arose out of a fraudulent business scheme involving the sale of the “Scrubbieglove” cleaning product. Defendant Pasquale Rubbo and other co-conspirators lied to investors to solicit money, ultimately defrauding them of more than six million dollars. The conspirators lured potential investors to the “Scrubbieglove” by lying about high returns on investment, potential and ongoing business deals, and how they would use and invest funds. They also misrepresented the Scrubbieglove’s production demand, telling told investors that the Scrubbieglove required substantial financing because of deals with QVC, Wal-Mart, Walgreens, and other major retailers. In reality, beyond producing a few samples, the conspirators never manufactured any Scrubbiegloves. Instead, the conspirators transferred investor funds to their own personal bank accounts. Defendant’s primary role in the scheme involved intimidating and threatening investors to ensure their silence. Defendant pleaded guilty to two fraud-related charges, and was sentenced to 106 months’ imprisonment. He appealed his sentence, alleging the government breached the Plea Agreement. Finding no breach, the Tenth Circuit affirmed Defendant’s sentence. View "United States v. Rubbo" on Justia Law

Kenneth Brewington told potential investors that he owned or controlled billions in assets that didn’t exist. At trial, Brewington acknowledged that much of what he had said was untrue. But he argued to the jury that he had been duped. "The jury was apparently unimpressed," and found him guilty on eleven counts of: (1) conspiracy to commit mail and wire fraud; (2) mail fraud; (3) wire fraud; (4) conspiracy to commit money laundering; (5) money laundering; and (6) monetary transactions in property derived from specified unlawful activity. Brewington was sentenced to 70 months in prison. Brewington appealed the convictions based on the district court’s: (1) exclusion of emails that he had sent and received and (2) restriction of testimony by another person duped by the same man who had allegedly duped Brewington. The Tenth Circuit rejected these challenges, finding Brewington never offered some of the emails into evidence, so the court never had an opportunity to consider their admissibility. The district court did exclude three other emails. But if the court did err in these rulings, the errors would have been harmless because the district court ultimately allowed Brewington to testify about the emails, and the evidence of his guilt was overwhelming. View "United States v. Brewington" on Justia Law

Defendant-Appellant Buck Leon Hammers served as the Superintendent of the Grant-Goodland Public School District in Grant, Oklahoma, until he was charged with conspiring with his secretary to commit bank fraud and embezzle federal program funds. Prior to trial, the Government moved to exclude a suicide note written by defendant’s secretary and co-conspirator, Pamela Keeling. In that note, Keeling took full responsibility for the fraud and exculpated Defendant of any wrongdoing. The district court granted the Government’s motion and prohibited Defendant from introducing the note at trial. The jury subsequently convicted Defendant of conspiracy to commit bank fraud, and conspiracy to embezzle federal program funds. The jury acquitted Defendant on the seven substantive counts of embezzlement and bank fraud. On appeal, defendant argued: (1) the district court erred in excluding the suicide note; (2) the Government did not present sufficient evidence to obtain a conviction; (3) the Government committed prosecutorial misconduct; and (4) the district court committed procedural error at sentencing. After review, the Tenth Circuit Court of Appeals determined the district court did not abuse its discretion in excluding the suicide note; the record contained evidence sufficient to support Defendant’s conviction, there was no prosecutorial misconduct, and no procedural error in the court’s calculation of Defendant’s sentence. View "United States v. Hammers" on Justia Law

Defendant Karen McClaflin pled guilty to two counts stemming from the operation of a “fix and flip” real estate Ponzi scheme which defrauded investors of more than $14.5 million dollars. At sentencing, the district court calculated the advisory sentencing guidelines at 135 to 168 months’ imprisonment, applied a 6-level enhancement for substantial financial hardship to more than twenty-five victims, and then determined a downward variant sentence of 96 months was appropriate. On appeal, McClaflin argued the district court: (1) abused its discretion by denying her motion for an additional continuance of the sentencing hearing; (2) procedurally erred by imposing the 6-level enhancement based upon victim impact statements; and (3) failed to consider all of the requisite 18 U.S.C. 3553(a) factors. The Tenth Circuit determined the district court did not plainly err when it sentenced McClaflin, therefore it affirmed the judgment and sentence. View "United States v. McClaflin" on Justia Law

Robert Holloway was convicted by jury of four counts of wire fraud, and one count of submitting a false tax return. Holloway was the president and CEO of US Ventures, a company that traded in the futures market. Holloway told investors he had developed a special algorithm that allowed him to trade without losses. He claimed that because of the algorithm he “could trade the markets and make money whether the market went up or the market went down.” Holloway’s grandiose claims were false, and revealed to be a Ponzi scheme. The district court sentenced Holloway to 225 months’ imprisonment, after applying a six-level enhancement for crimes involving 250 or more victims under U.S.S.G. 2B1.1(b)(2)(C) (2014). After unsuccessfully challenging his conviction and sentence on direct appeal, Holloway filed a 28 U.S.C. 2255 motion, arguing: (1) a total breakdown of communication between Holloway and his trial counsel caused his trial counsel to perform ineffectively; (2) his trial counsel acted ineffectively by failing to argue that the evidence did not support the district court’s application of the six-level sentencing enhancement; and (3) the prosecution violated his due process rights by failing to turn over to the defense favorable information possessed by a prosecution witness contrary to Brady v. Maryland, 373 U.S. 83 (1963). The district court denied Holloway’s 2255 motion, but granted a certificate of appealability on all three issues. Finding no reversible error, the Tenth Circuit affirmed the district court judgment. View "United States v. Holloway" on Justia Law

Wendy and Daryl Yurek were charged with tax evasion and bankruptcy fraud. After a joint jury trial, the Yureks were convicted on both offenses. The district court then sentenced Mrs. Yurek to a prison term of 27 months, leading her to appeal the conviction and sentence. On appeal, Mrs. Yurek challenged the sufficiency of the evidence presented against her, and claimed the district court erred in denying her motions for severance and a new trial. The Tenth Circuit affirmed in part and reversed in part: affirming Mrs. Yurek’s conviction, but vacated her sentence. The Court determined the district court applied the wrong test when deciding whether to grant a mitigating-role adjustment. View "United States v. Yurek (Wendy)" on Justia Law

Shawn Gorrell was an insurance salesman based in Tulsa, Oklahoma. His father was an accountant in Tulsa whose clients included several dentists and Gorrell sold insurance to some of them. In 2009, Gorrell began to pitch investments to these dentists that were outside of his typical insurance products. Some dentists initially gave Gorrell modest sums to invest, but later the amounts ballooned to hundreds of thousands of dollars. Gorrell would ultimately be convicted by jury on three counts of wire fraud and three counts of tax evasion. He appealed only the tax evasion charges, seeking a new trial on those counts. He argued the trial court plainly erred when it instructed the jury to consider “specified theories of an affirmative act (an element of tax evasion), which were legally invalid theories of guilt as a matter of law, the jury was instructed to be unanimous in finding an affirmative act, and the jury returned a general verdict of guilt.” The Tenth Circuit concluded the district court did not err, “much less plainly err,” in its instructions to the jury. Given the evidence elicited at trial, in light of those instructions, Gorrell’s convictions for tax evasion were supported. View "United States v. Gorrell" on Justia Law

In 2014, CNB auditors conducted a surprise audit of the Burlington, Kansas Central National Bank (“CNB” or “Bank”) vault. The vault was missing $764,000. When they began to suspect defendant Denise Christy, she forged documents to purport that she had sent the missing cash to the Federal Reserve Bank of Kansas City (“FRB”). A grand jury indicted her on one count of bank embezzlement, six counts of making false bank entries, six counts of failing to report income on her taxes, and 10 counts of money laundering. After a six-day trial, a jury found Christy guilty of all charges except four money laundering counts. On appeal, Christy argued: (1) cumulative prosecutorial misconduct violated her due process rights; (2) the evidence was insufficient for her money laundering convictions; and (3) the jury instructions improperly omitted a “materiality” element for the false-bank-entry charges. The Tenth Circuit: (1) rejected Christy’s prosecutorial misconduct challenge because she has not shown the prosecutor’s comments influenced the jury’s verdict; (2) reversed Christy’s money laundering convictions because the Government did not produce sufficient evidence of the intent to file a false tax return; and (3) affirmed Christy’s false-bank-entry convictions because, even assuming materiality was an implied element of 18 U.S.C. 1005, its omission from the jury instruction was harmless error. The matter was remanded to the district court with instructions to vacate the convictions for money laundering, resentence the defendant, and further proceedings. View "United States v. Christy" on Justia Law

After investigating complaints regarding the tax-preparation services of defendant Donald Iley, the Colorado Board of Accountancy (Board) issued an “Agreement and Final Agency Order” in which Iley admitted to engaging in professionally negligent conduct and agreed to accept certain disciplinary sanctions, including a $10,000 fine and a five-year probationary period. Among the acts for which the Board disciplined Iley was taking a client’s money, ostensibly to pay the client’s payroll taxes, but then failing to promptly and properly pay those funds to the IRS. While serving the Order’s probationary term, Iley executed a fraudulent scheme in which he fleeced his clients of more than $11 million. As part of this scheme, Iley fraudulently misrepresented to his clients that he was taking their funds to pay outstanding payroll taxes to the IRS but, instead, Iley used those funds for personal purposes. After this fraud was discovered, Iley pleaded guilty to wire fraud and aiding in the preparation of a false tax return. At sentencing, the district court enhanced Iley’s sentence under the U.S. Sentencing Guidelines, section 2B1.1(b)(9)(C). The question presented to the Tenth Circuit was whether the court erred in doing so. The Court held that under the particular circumstances of this case, the court did not err in Iley's sentence, and affirmed. View "United States v. Iley" on Justia Law