Justia White Collar Crime Opinion Summaries

Articles Posted in US Court of Appeals for the Third Circuit
by
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

by
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

by
Attorney Smukler ran political campaigns for 30 years and developed expertise with Federal Election Commission law. In 2012, U.S. Representative Brady ran for reelection in Pennsylvania’s First Congressional District in Philadelphia. Brady's challenger, Moore, struggled to raise money and personally loaned his campaign about $150,000. Brady agreed to give Moore $90,000 to drop out of the race. To steer the money to Moore, Smukler devised a plan that involved a bogus corporation, “dummy invoices,” and funneling cash through a political consulting firm. In the 2014 Democratic Primary for the Thirteenth Congressional District of Pennsylvania, Smukler dipped into the general election reserve on behalf of former U.S. Representative Margolies, then used friends and family as strawmen to evade federal election laws.Smukler was convicted on nine counts of election law violations. He was sentenced to 18 months’ imprisonment, plus fines and assessments. The Third Circuit vacated the convictions on two counts but otherwise affirmed. The court upheld the jury instructions defining the term “willfully,” except with respect to counts that charged Smukler with violating 18 U.S.C. 2 and 1001(a)(1) by causing the false statements of others within the Brady and Margolies campaigns. A proper charge for willfulness in cases brought under those sections in the federal election law context requires the prosecution to prove that defendant knew of the statutory obligations, that he attempted to frustrate those obligations, and that he knew his conduct was unlawful. View "United States v. Smukler" on Justia Law

by
Lucas, a financial advisor, wanted to take over Burke Farm to obtain funding from a New Jersey program that paid property owners for easements to preserve farmland. Lucas submitted a fraudulent application to assume Burke Farm’s mortgage; obtained a $250,000 loan from a client under false pretenses; and forged a signature on the promissory note. The farm was owned by Diamond, LLC. Lucas, his wife, and his father used the proceeds of his fraud to acquire the LLC. Convicted of wire fraud, engaging in an illegal monetary transaction, loan application fraud, making false statements to the IRS, aggravated identity theft, obstructing a grand jury investigation, and falsifying records in a federal investigation, Lucas consented to the criminal forfeiture of Burke Farm in conjunction with his 60-month sentence. The LLC filed an unsuccessful objection, 21 U.S.C. 853(n)(6)(A),The Third Circuit reversed. The LLC acquired Burke Farm over five years before Lucas’s crimes and is a legitimate, separate legal entity from Lucas. The court noted that the government could have sought criminal forfeiture of Lucas’s interest in the LLC and civil forfeiture of his family’s interests. Although illicit proceeds were involved in the family’s acquisition of Diamond, the LLC acquired the farm legitimately years before. The government must turn square corners when it exercises its power to confiscate private property. View "United States v. Lucas" on Justia Law

by
Wilmington Trust financed construction projects. Extensions were commonplace. Wilmington’s loan documents reserved its right to “renew or extend (repeatedly and for any length of time) this loan . . . without the consent of or notice to anyone.” Wilmington’s internal policy did not classify all mature loans with unpaid principals as past due if the loans were in the process of renewal and interest payments were current, Following the 2008 "Great Recession," Wilmington excluded some of the loans from those it reported as “past due” to the Securities and Exchange Commission and the Federal Reserve. Wilmington’s executives maintained that, under a reasonable interpretation of the reporting requirements, the exclusion of the loans from the “past due” classification was proper. The district court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury found the reporting constituted “false statements” under 18 U.S.C. 1001 and 15 U.S.C. 78m, and convicted the executives.The Third Circuit reversed in part. To prove falsity beyond a reasonable doubt in this situation, the government must prove either that its interpretation of the reporting requirement is the only objectively reasonable interpretation or that the defendant’s statement was also false under the alternative, objectively reasonable interpretation. The court vacated and remanded the conspiracy and securities fraud convictions, which were charged in the alternative on an independent theory of liability, View "United States v. Harra" on Justia Law

by
In 2012, Rad and others were charged with acquiring penny stocks, “pumping” the prices of those stocks by bombarding investors with misleading spam emails, and then “dumping” their shares at a profit. Rad was convicted of conspiring to commit false header spamming and false domain name spamming under the Controlling the Assault of Non-Solicited Pornography And Marketing Act (CAN-SPAM), 15 U.S.C. 7701(a)(2), which addresses unsolicited commercial email. The PSR recommended raising Rad’s offense level to reflect the losses inflicted on investors, estimating that Rad realized about $2.9 million in “illicit gains” while acknowledging that because “countless victims” purchased stocks, the losses stemming from Rad’s conduct could not “reasonabl[y] be determined.” Rad emphasized the absence of evidence that any person lost anything. Rad was sentenced to 71 months’ imprisonment. The record is silent as to how the court analyzed the victim loss issue. The Third Circuit affirmed. DHS initiated removal proceedings under 8 U.S.C. 1227(a)(2)(A)(iii), which renders an alien removable for any crime that “involves fraud or deceit” “in which the loss to the victim or victims exceeds $10,000.” The IJ and the BIA found Rad removable.The Third Circuit remanded. Rad’s convictions for CAN-SPAM conspiracy necessarily entail deceit under 8 U.S.C. 1101(a)(43)(M)(i). The second element, requiring victim losses over $10,000, however, was not adequately addressed. The court noted that intended losses, not just actual ones, may meet the requirement. View "Rad v. Attorney General United States" on Justia Law

by
While working for Vanguard, Capps fraudulently caused funds from dormant accounts to be mailed to co-conspirators, one of whom then wrote checks conveying back to him some of the proceeds. Capps received at least two checks, one for $555,200 and another for $29,750, and did not report the income on his federal tax returns. Capps pled guilty to conspiracy to commit mail fraud, 18 U.S.C. 1349, money laundering, sections 1956(a)(1)(B)(i) and 2, and filing a false tax return, 26 U.S.C. 7206(1). At sentencing, he did not raise any objections to the PSR and the court adopted its calculation of the applicable guidelines range (63-78 months), including two separate 2-level adjustments based on abuse of trust and gross receipts. The court sentenced Capps to 48 months’ imprisonment and ordered Capps to pay $2,137,580.81 in restitution.The Third Circuit vacated, finding that the district court plainly erred in applying the abuse of trust adjustment. As to the application of the gross receipts adjustment, the court reasoned that, while the district court did not plainly err in deciding the adjustment could be applicable, it is not clear on this record whether Capps met the threshold for the adjustment to actually apply. View "United States v. Capps" on Justia Law

by
In 1998, Pennsylvania and 45 other states entered into a settlement agreement with certain cigarette manufacturers, who agreed to disburse funding to the states to cover tobacco-related healthcare costs. Pennsylvania’s 2001 Tobacco Settlement Act established the "EE Program" to reimburse participating hospitals for “extraordinary expenses” incurred for treating uninsured patients according to a formula. The Department of Human Services (DHS) determines the eligibility of each hospital for EE Program payments. The Pennsylvania Auditor General reported that for Fiscal Years 2008-2012, some participating hospitals received disbursements for unqualified claims, and recommended that DHS claw back funds from overpaid hospitals and redistribute the money to hospitals that had been underpaid. DHS followed that recommendation for fiscal years prior to 2010 but discovered methodological discrepancies and discontinued the process for Fiscal Years 2010-2012.Plaintiffs, on behalf of all “underpaid” hospitals, sued an allegedly overpaid hospital, alleging conspiracy to defraud the EE Program in violation of RICO, 18 U.S.C. 1961–1964. The plaintiffs alleged that the defendants submitted fraudulent claims for reimbursement, in violation of the wire fraud statute, 18 U.S.C. 1343 (a RICO predicate offense). The Third Circuit reversed the dismissal of the claims, finding that the theory of liability adequately alleges proximate causation. No independent factors that accounted for the plaintiffs’ injury and no more immediate victim was better situated to sue. View "St. Lukes Health Network, Inc. v. Lancaster General Hospital" on Justia Law

by
VOG billed itself as an advocacy group helping victims of timeshare fraud get out of their timeshare debts. A jury determined that VOG had actually defrauded its customers and that three individual defendants (including Lacerda) were each knowing participants in that fraud. Lacerda was sentenced to 324 months’ imprisonment for his leading role in the fraudulent enterprise.The Third Circuit affirmed the respective convictions and sentences. The court rejected a claim of impermissible “overview testimony” by an FBI agent; an officer who is familiar with an investigation or was personally involved may tell the story of that investigation—how the investigation began, who was involved, and what techniques were used, and, with a proper foundation, may offer lay opinion testimony and testify about matters within his personal knowledge. The district court did not abuse its discretion when it disqualified defense counsel based on a conflict of interest; when it denied replacement counsel’s motion for a continuance; when it excluded from evidence, as hearsay, an email sent by Lacerda to VOG’s former CFO; in exercising its sentencing discretion; or by ordering the forfeiture of all VOG’s gross proceeds. View "United States v. Lacerda" on Justia Law

by
Fishoff began trading securities in the 1990s. By 2009, he had earned enough money to establish his own firm, with one full-time employee and several independent contractors. Fishoff had no formal training in securities markets, regulations, or compliance. Nor did he hold any professional license. He operated without expert advice. Fishoff engaged in short-selling stock in anticipation of the issuer making a secondary offering. Secondary offerings are confidential but a company, through its underwriter, may contact potential buyers to assess interest. When a salesperson provides confidential information, such as the issuer's name, the recipient is barred by SEC Rule 10b-5-2, from trading the issuer’s securities or disclosing the information before the offering is publicly announced. Fishoff’s associates opened accounts at investment banking firms in order to receive solicitations to invest in secondary offerings. They agreed to keep the information confidential but shared it with Fishoff, who would short-sell the company’s shares.Fishoff pled guilty to securities fraud (15 U.S.C. 78j(b), 78ff; 17 C.F.R. 240.10b-5 (Rule 10b-5); 18 U.S.C. 2), stipulating that he and his associates made $1.5 to $3.5 million by short-selling Synergy stock based on confidential information. Fishoff unsuccessfully claimed that he had no knowledge of Rule 10b5-2 and was entitled to the affirmative defense against imprisonment under Securities Exchange Act Section 32, as a person who violated a Rule having “no knowledge of such rule or regulation”. The Third Circuit affirmed his 30-month sentence. Fishoff adequately presented his defense. The court’s ruling was sufficient; the government never agreed that the non-imprisonment defense applied. Fishoff did not establish a lack of knowledge. His attempts to conceal his scheme suggests that he was aware that it was wrong. View "United States v. Fishoff" on Justia Law