Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Third Circuit
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Defendant, a former scientist employed by GlaxoSmithKline (GSK), pled guilty to a single count of conspiracy to steal trade secrets, in violation of 18 U.S.C. 1832(a)(5) based on allegations he stole company documents. At sentencing, the government sought a sentencing enhancement based on the “loss” attributable to Defendant's conduct. However, the district court denied the government's request for an enhancement.On appeal, the Third Circuit affirmed. The court noted that finding that under the commentary to U.S.S.G. 2B1.1, the definition of “loss” includes losses that the defendants intended. However, here, it was uncontested that GSK did not suffer any actual loss. Further, the court determined that the government failed to prove that Defendant purposely sought to inflict pecuniary harm on GSK. View "USA v. Yu Xue" on Justia Law

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Four defendants, who have multiple ties to organized crime, were convicted for their roles in the unlawful takeover and looting of FirstPlus Financial, a publicly traded mortgage loan company. Their scheme began with the defendants’ and their co-conspirators’ extortion of FirstPlus’s board of directors and its chairman, using lies and threats to gain control of the company. Once they forced the old leadership out, the defendants drained the company of its value by causing it to enter into expensive consulting and legal-services agreements with themselves, causing it to acquire (at vastly inflated prices) shell companies they personally owned, and using bogus trusts to funnel FirstPlus’s assets into their own accounts. They ultimately bankrupted FirstPlus, leaving its shareholders with worthless stock.Each defendant was convicted of more than 20 counts of criminal behavior and given a substantial prison sentence. In a consolidated appeal, the Third Circuit affirmed, rejecting challenges to the investigation, the charges and evidence against them, the pretrial process, the government’s compliance with its disclosure obligations, the trial, the forfeiture proceedings, and their sentences. The government conceded that the district court’s assessment of one defendant’s forfeiture obligations was improper under a Supreme Court decision handed down during the pendency of this appeal and remanded that assessment. View "United States v. Scarfo" on Justia Law

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The Bank Secrecy Act requires U.S. citizens to report interests in foreign accounts with a value exceeding $10,000, 31 U.S.C. 5314. Collins, a dual citizen of the U.S. and Canada, has lived in the U.S. since 1994 and has bank accounts in the U.S., Canada, France, and Switzerland. In 2007, the balance of his Swiss account exceeded $800,000. Collins did not report any of those accounts until he voluntarily amended his tax returns in 2010. The IRS accepted Collins into its Offshore Voluntary Disclosure Program (OVDP). His amended returns for 2002-2009 yielded modest refunds stemming from large capital losses in 2002. Collins then withdrew from the OVDP, prompting an audit. Because Collins invested in foreign mutual funds, his Swiss holdings were subject to an additional tax on passive foreign investment companies, 26 U.S.C. 1291, which he failed to compute in his amended returns. The IRS audit determined that Collins owed an additional $71,324 plus penalties. In 2015 the IRS determined that since he withdrew from the OVDP, Collins was liable for civil penalties for “willful failure” to report foreign accounts. The IRS assessed a civil penalty of $308,064.The district court and Third Circuit affirmed, citing a “decades‐long course of conduct, omission, and scienter” by Collins in failing to disclose his foreign accounts. The disparity between Collins’s putative income tax liability and his penalty is stark but is consistent with the statute. View "United States v. Collins" on Justia Law

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Allinson was convicted of federal programs bribery, 18 U.S.C. 666(a)(2), and conspiracy, 18 U.S.C. 371, in connection with a pay-to-play scheme involving Pawlowski, the former Mayor of Allentown, Pennsylvania.The Third Circuit affirmed. Sufficient evidence showed the parties’ plan to steer a Parking Authority contract to Allinson’s law firm in exchange for campaign contributions to support Allinson’s bribery conviction; it is an “official act” for a public official to use his power to influence the awarding of government contracts, even if the official lacks final decision-making power. The court rejected Allinson’s argument that the indictment, which alleged a single conspiracy among Allinson and others, impermissibly varied from the evidence at trial that, he claimed, proved only multiple, unrelated conspiracies. The charged conspiracy included over 10 alleged co-conspirators and seven distinct sub-schemes, only one of which involved Allinson but the government’s efforts at trial were reasonably calculated to prevent guilt transference. No constructive amendment of the indictment occurred. The prosecution’s statement in closing arguments that “Bribery happens with a wink and a nod and sometimes a few words, an understanding between two people,” was not improper. Allinson failed to show “clear and substantial prejudice” resulting from the joint trial. View "United States v. Allinson" on Justia Law

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Pawlowski, the former mayor of Allentown, Pennsylvania, was convicted of federal programs bribery, 18 U.S.C. 666; Travel Act bribery, 18 U.S.C. 1952; attempted Hobbs Act extortion, 18 U.S.C. 1001; wire and mail fraud, honest services fraud, making false statements to the FBI, and conspiracy. The charges stemmed from a scheme in which Pawlowski steered city contracts and provided other favors in exchange for campaign contributions. The district court imposed a 180-month sentence.The Third Circuit affirmed. There was sufficient evidence for a reasonable jury to find “quid pro quo” to support the bribery convictions. Any error caused by Pawlowski's inability to recross-examine a government witness was harmless beyond a reasonable doubt. Pawlowski’s sentence is procedurally and substantively reasonable. The case against Pawlowski was strong. The evidence showed a man eager to influence and be influenced if it would help him fund his political campaigns. View "United States v. Pawlowski" on Justia Law

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Agarwal, a contract network engineer, had security credentials that granted him access to the corporate offices and internal networks of telecommunications companies. Agarwal installed key-logging software to obtain employee usernames and passwords and installed unauthorized hardware and computer code that enabled him to surreptitiously transfer information. Agarwal also used a vacant office without authorization. The companies learned of the unauthorized activities and devoted significant resources to investigate and remediate the breaches; compromised accounts and computers were temporarily taken offline. Agarwal monitored the investigations.Agarwal eventually pleaded guilty to aggravated identity theft, 18 U.S.C. 1028A(a)(1), and two counts under the Computer Fraud and Abuse Act (CFAA) for intentionally accessing a protected computer without authorization and obtaining information valued at more than $5,000, 18 U.S.C. 1030(a)(2); 1030(c)(2)(B)(iii). The statutory maximum sentence was 12 years, five years for each CFAA violation, plus a mandatory consecutive two-year term for identity theft. Agarwal disputed the PSR's loss calculation of over $3,000,000, most of which was for salary expenses for investigating and remediating the breaches. His Guidelines range was 70-87 months’ imprisonment for the CFAA violations. The court sentenced Agarwal to 70 months’ imprisonment for the CFAA violations, plus the mandatory two-year sentence. The Third Circuit affirmed, rejecting an argument the plea was unknowing because Agarwal could not have reasonably foreseen the losses that would be attributed to his CFAA violations. Agarwal signed the plea agreement aware that the loss amount was disputed and waived the right to appeal his sentence. View "United States v. Agarwal" on Justia Law

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Desu co-owned Heights Pharmacy with Desai. Desai collected Heights' cash earnings and deposited a small portion of that cash into the pharmacy’s bank account, leaving the rest undeposited. After paying for certain items from the undeposited cash, such as part of Desai’s salary, Desai split the undeposited cash between herself and Desu. Desai kept the cash earnings off the general ledger. The underreporting on Heights Pharmacy’s tax returns led to underreported net income on Desu’s individual tax returns. Following a government investigation, Desai pleaded guilty and testified against Desu. Desu also co-owned Arthur Avenue Pharmacy, with Pujara. Desu and Pujara also kept the cash earnings off Arthur’s general ledger. Pujara testified against Desu, who was convicted under 18 U.S.C. 371 for conspiracy to impede the lawful government functions of the IRS and willfully assisting in the preparation and presentation of materially false tax returns.The Third Circuit affirmed, rejecting arguments that the jury received a faulty government exhibit for use in its deliberations; two counts in the indictment fail to state an offense; the district court erred in excluding testimony regarding the Desais’ cash transactions on relevancy grounds; the district court erred in denying a “Franks” evidentiary hearing; the government constructively amended the indictment; and the district court erred at sentencing by failing to account for certain deductions and exclusions in Desu’s income when calculating the tax loss. View "United States v. Desu" on Justia Law

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In 2017, Kirschner earned $30,105 by importing counterfeit coins and bullion and then, posing as a federal law enforcement agent, selling them as genuine articles to unsuspecting customers. Searching his home and interdicting packages, agents seized thousands of counterfeit coins and bullion that, according to the government’s expert, would have been worth approximately $46.5 million if genuine. Kirschner pleaded guilty to impersonating an officer acting under the authority of the United States, 18 U.S.C. 912, and importing counterfeit coins and bars with intent to defraud, 18 U.S.C. 485. The court applied a two-level sentencing enhancement because Kirschner’s fraud used sophisticated means; another two-level enhancement because Kirschner abused a position of public trust to facilitate his crimes; and a 22-level enhancement because the “loss” attributable to his scheme was greater than $25 million but less than $65 million.The Third Circuit vacated Kirschner’s 126-month sentence. While the district court was within its discretion to apply the abuse-of-trust and use-of-sophisticated-means enhancements, it clearly erred in applying the 22-level enhancement for loss, and the error was not harmless. While the court focused on what Kirschner intended to do with the high-value counterfeits, it never found that the government proved, by a preponderance of the evidence, that Kirschner intended to sell the coins as counterfeits (not replicas) for the prices the government claimed. View "United States v. Kirschner" on Justia Law

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Shulick, an attorney, owned and operated DVHS, a for-profit business that provided alternative education to at-risk students. The School District of Philadelphia contracted with DVHS to operate Southwest School for the 2010-2011 and 2011-2012 school years. DVHS was to provide six teachers at a cost of $45,000 each; benefits for the staff at a total cost of $170,000 annually; four security workers totaling $130,000 annually; and a trained counselor and two psychology externs totaling $110,000 annually. The agreement was not flexible as to budgeted items. Shulick failed to employ the required dedicated security personnel, hired fewer teachers, provided fewer benefits, and paid his educators far less than required. Shulick had represented to the District that he would spend $850,000 on salary and benefits annually but spent about $396,000 in 2010-11 and $356,000 in 2011-12. Shulick directed the unspent funds to co-conspirator Fattah, the son of a former U.S. Representative, to pay off liabilities incurred across Shulick’s business ventures, keeping a cut for himself.Shulick was convicted of conspiring with Fattah to embezzle from a program receiving federal funds (18 U.S.C. 371), embezzling funds from a federally funded program (18 U.S.C. 666(a)(1)(A)), bank fraud (18 U.S.C. 1344), making a false statement to a bank (18 U.S.C. 1014), and three counts of filing false tax returns (26 U.S.C. 7206(1)). The Third Circuit affirmed, rejecting arguments ranging from speedy trial violations to errors in evidentiary rulings, faulty jury instructions, and sentencing miscalculations. View "United States v. Shulick" on Justia Law

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In 2013, Raia ran for election to the Hoboken city council and chaired a political action committee, promoting a ballot referendum to weaken rent control laws. Raia’s PAC cut $50 checks to hundreds of voters. Raia claimed that those voters had done get-out-the-vote work, such as wearing campaign-branded t-shirts and handing out campaign literature. Raia lost the election. The government concluded that Raia instructed campaign workers to collect unsealed mail-in ballots so that he could verify whether each bribed voter cast his ballot as directed before having a $50 check issued to the voter. Charged with conspiracy to commit an offense against the United States, 18 U.S.C. 371, with the underlying offense being the use of the mails to facilitate an “unlawful activity” in violation of the Travel Act, 18 U.S.C. 1952(a)(3) (state bribery offenses), Raia’s co-conspirators pleaded guilty. Raia was convicted.The court calculated Raia’s Guidelines range as 15–21 months’ imprisonment and sentenced Raia to three months. The government appealed, claiming that the court miscalculated the Guidelines offense level by not applying a four-level aggravating role enhancement under U.S.S.G. 3B1.1(a) and a two-level obstruction of justice enhancement under section 3C1.1. The Third Circuit vacated and remanded for the district court to make whatever factual findings are necessary to determine whether either or both of the enhancements apply. View "United States v. Raia" on Justia Law