Justia White Collar Crime Opinion Summaries

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

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

Barringer was the Executive Vice President and a Board member of J&R, a Virginia manufacturing company. By 2014, J&R was delinquent on filing and paying its 941 (employee withholding) taxes. Fearing personal liability, Barringer submitted a Hardship Withdrawal Form requesting $311,859.04 from her 401(k) account “[t]o prevent eviction or ... foreclosure of the mortgage on [her] principal residence.” Barringer deposited the funds into J&R's account to pay the delinquent taxes. Barringer’s mortgage balance was approximately $200,000 at the time; her payments were not delinquent. In 2016, J&R was again behind on its 941 taxes. Barringer requested a final distribution from her 401(k) account, falsely citing the end of her employment with J&R. Barringer again deposited the funds, plus some of her personal savings, into the J&R account. Instead of paying delinquent taxes, Barringer paid herself and vendors. After providing misinformation to federal agents, Barringer was convicted of willfully failing to collect and truthfully account for and pay taxes, 26 U.S.C. 7202, and making materially false statements to federal agents, 18 U.S.C. 1001(a)(2).The Fourth Circuit affirmed the convictions and 36-month sentence. Any error in the denial of Barringer’s pretrial motion to dismiss the wire fraud counts was harmless because the court subsequently granted her motion for a judgment of acquittal on those charges. Barringer’s false statements to investigators were “material to a matter within the jurisdiction of the agency.” The court upheld an abuse-of-trust enhancement under U.S.S.G. 3B1. View "United States v. Barringer" on Justia Law

Hardwick helped found a law firm, MHS. MHS later sold part of its foreclosure operation. Hardwick received $14-$15 million in compensation. Hardwick lost the money and owed millions in loans, many for gambling debts. When a bank and a casino sued him, Hardwick lied to a different bank in a line-of-credit application. In addition, in 2011-2014, Hardwick siphoned off about $26.5 million from MHS; $19 million came from trust accounts. Hardwick relied heavily on Maurya, who initially worked as an MHS controller. Hardwick promoted Maurya to CFO, giving her broad authority over the trust accounts. At Hardwick’s request, she repeatedly sent money from MHS to Hardwick or his creditors and significantly underreported the distributions. After a 2014 internal audit, Hardwick was convicted of wire fraud, conspiracy to commit wire fraud, and making false statements to a federally insured financial institution and was sentenced to 180 months’ imprisonment—an upward variance from the Guidelines range of 108-135 months. Maurya received a sentence of 84 months. A restitution order required Maurya and Hardwick to pay, jointly and severally, $40,307,431.00.The Eleventh Circuit vacated the restitution order as not supported by the reasoning required by law; affirmed Hardwick’s convictions and sentence; and vacated Maurya’s sentence. The district court violated the Ex Post Facto Clause by applying the 2018 Guidelines, which included a two-level substantial financial hardship enhancement added in 2015, after Maurya’s offense. View "United States v. Maurya" on Justia Law

The Second Circuit reversed defendants' convictions for wire fraud in violation of 18 U.S.C. 1343 and conspiracy to commit wire fraud and bank fraud in violation of 18 U.S.C. 1349, in connection with the London Interbank Offered Rate (LIBOR).The court concluded that the evidence was insufficient to prove that defendants caused DB to make LIBOR submissions that were false or deceptive, i.e., to prove that they engaged in conduct that was within the scope of section 1343. In this case, the government failed to produce any evidence that any DB LIBOR submissions that were influenced by the bank's derivatives traders were not rates at which DB could request, receive offers, and accept loans in DB's typical loan amounts. Therefore, the government failed to show that any of the trader-influenced submissions were false, fraudulent, or misleading. Furthermore, the government's failure to prove that the LIBOR submissions did not comply with the BBA LIBOR Instruction and were false or misleading means it failed to prove conduct that was within the scope of the statute prohibiting wire fraud schemes. The court need not reach defendants' other contentions and the government's cross-appeals as to sentencing are moot. View "United States v. Connolly" on Justia Law

In this interlocutory appeal, the First Circuit affirmed the judgment of the district court denying Defendants' claims that their prosecutions ran afoul of the prohibition in a congressional appropriations rider against spending federal funds to prosecute criminal defendants for marijuana-related offenses, holding that there was no error.The appropriations rider at issue placed a practical limit on federal prosecutors' ability to enforce the Controlled Substances Act, 21 U.S.C. 801 et seq., with respect to certain conduct involving medical marijuana. Defendants - two individuals and three companies - were indicted for marijuana-related offenses. Defendants moved to enjoin their prosecutions pursuant to the appropriations rider. The district court denied the motion. The First Circuit affirmed, holding that the appropriations rider did not bar the pending federal prosecution against Defendants. View "United States v. Bilodeau" on Justia Law

The government accused Orrock of tax evasion for concealing income he received from the sale of a vacant lot that he controlled. Rather than report the sale proceeds on his personal tax return, Orrock belatedly disclosed the sale in the tax return for a partnership that he also controlled. In that return, he significantly underreported the sale proceeds.The Ninth Circuit affirmed his conviction for evading the assessment of taxes, 26 U.S.C. 7201, rejecting Orrock’s argument that the statute of limitations barred his conviction because it ran from the date he filed his false personal tax return, not from the later act of filing the partnership return. Acknowledging that some language in precedent may seemingly support that argument, the court clarified that the statute of limitations for evasion of assessment cases under section 7201 runs from the last act necessary to complete the offense, either a tax deficiency or the last affirmative act of evasion, whichever is later. The court aligned evasion of assessment cases with evasion of payment cases and joined all the other circuit courts that have addressed the issue. The indictment was filed within six years of Orrock’s last affirmative act of evasion, the filing of the partnership tax return, and was timely. View "United States v. Orrock" on Justia Law

Smith, a software engineer, obtained the coordinates of artificial fishing reefs in the Gulf of Mexico from a website owned by StrikeLines, a Florida business. Smith remained in Mobile, Alabama while posting information about the reef coordinates on Facebook. Smith initially agreed to remove the posts and to assist Strikelines with its security issues in exchange for additional coordinates but communications broke down. StrikeLines contacted law enforcement. Officers executed a search warrant and found StrikeLines’s coordinates and other customer and sales data on Smith’s devices. Smith was charged in the Northern District of Florida with violation of the Computer Fraud and Abuse Act, 18 U.S.C. 1030(a)(2)(C), (c)(2)(B)(iii), theft of trade secrets, and transmitting a threat through interstate commerce with intent to extort. Smith argued that venue was improper because all the prohibited conduct occurred in the Alabama and the data that was accessed and obtained was in the Middle District of Florida.Smith was convicted on the trade secrets and extortion counts in the Northern District of Florida. The Eleventh Circuit vacated Smith’s trade secrets conviction and related sentencing enhancements for lack of venue, affirmed the extortion conviction and related sentencing enhancements, and remanded. Smith never committed any essential conduct for the trade secrets conviction in the Northern District of Florida. Sufficient evidence supported the extortion conviction. View "United States v. Smith" on Justia Law

In schemes involving Sonoma County, California real estate, attorney Lonich conspired with Sonoma Valley Bank (SVB) officers Melland and Cutting to obtain fraudulent loans. The Ninth Circuit affirmed their convictions but vacated their sentences.The Sixth Amendment’s Speedy Trial Clause was not violated with respect to charges first brought in a superseding indictment. Even assuming the clock started with the original indictment, the delay caused no relevant prejudice. With respect to money laundering (18 U.S.C. 1957) and misapplication of bank funds (18 U.S.C. 656) charges, the district court’s general “knowingly” jury instruction was permissible. Sufficient evidence supported Melland’s conviction for bribery by a bank employee (18 U.S.C. 215(a)(2)). The district court appropriately instructed the jury that, to find Melland “acted corruptly,” the jury must determine he “intend[ed] to be influenced or rewarded in connection with any business or transaction of” a financial institution. Sufficient evidence also supported Lonich’s conviction for attempted obstruction of justice (18 U.S.C. 1512(c)(2)) by encouraging a straw buyer to mislead the grand jury about his role in the scheme.The district court applied several enhancements that dramatically increased the recommended Guidelines sentencing ranges, premised on a finding that defendants caused SVB to fail, making them responsible for associated losses. The court applied a “clear and convincing evidence” standard and noted the district court made no independent findings about the cause of the bank’s collapse. Restitution orders ($20 million) were premised on the same theory. View "United States v. Lonich" on Justia Law

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