Justia White Collar Crime Opinion Summaries

Defendant was convicted of wire fraud and conspiracy to commit wire fraud. The district court sentenced defendant to 120 months in prison, entered an order of forfeiture in the amount of $2.4 million, and ordered restitution in the amount of $2.4 million. The court concluded that the district court erred in applying the two sentencing enhancements for receiving gross receipts in excess of $1 million from a financial institution pursuant to U.S.S.G. 2B1.1(b)(16)(A) and for abuse of a position of trust pursuant to U.S.S.G. 3B1.3. In a summary order published contemporaneously with this opinion, the court affirmed the district court’s judgments on the indictment and sentencing enhancement for a loss figure of $8.1 million, and declined to resolve defendant's ineffective assistance of counsel claim. View "United States v. Huggins" on Justia Law

From 2009-2012, the federal government appropriated $150 million annually to the government of the Virgin Islands; Willis was Executive Director of the Legislature for the Virgin Islands, with authority to administer contracts. During Willis’s tenure, the legislature’s main building underwent major renovations. Willis was substantially involved in securing contractors. Three contractors later testified that they gave cash or other items of value to Willis to secure more government work or to ensure payment of their invoices. In 2010, the U.S. Department of the Interior audited the legislature’s administrative section while the renovations were taking place and concluded that the legislature had mismanaged public funds. After an investigation, an indictment issued for Willis’s prosecution on extortion charges (18 U.S.C. 1951(a)) and bribery charges (18 U.S.C. 666(a)(1)). The Third Circuit affirmed his conviction and five-year prison term, upholding admission of evidence of Willis’s prior acceptance of bribes. The indictment adequately alleged all required elements of bribery: the parties, the relevant amounts of money exchanged, where the illegal transactions occurred, that Willis used his public position unlawfully, specific details of each transaction, and improper purposes under the federal statutes. The government proved a sufficient nexus between Willis’s conduct or his status as Executive Director and a corresponding effect on federal funds. View "United States v. Willis" on Justia Law

At USARMS, Burns provided estate-planning services and offered clients an investment in promissory notes that USARMS sold. The notes were allegedly backed by Turkish bonds. USARMS’s owners, Durmaz and Pribilski, claimed to have a connection in the Turkish government that allowed them to purchase the bonds at a below-market rate. USARMS guaranteed an 8.5 percent rate of return and told investors that returns could be as high as 14 percent. In reality, USARMS never purchased Turkish bonds. Durmaz and Pribilski used the investments for their personal use and to pay earlier investors “returns.” Burns was unaware of that deception. Before charges were filed, Durmaz fled the country and Pribilski died. Based on the government’s assertion that that Burns had induced victims to invest by falsely telling them that he had experience managing investments and that he and his family had invested in the bonds, a jury convicted Burns of wire fraud and mail fraud. The district court enhanced Burns’s sentence, ordered restitution, and ordered forfeiture based on the victims’ $3.3 million total loss in the Ponzi scheme. The Seventh Circuit affirmed the conviction, rejecting a claim of insufficient evidence of material misrepresentations. The court remanded the sentencing enhancement and the restitution order because the district court failed to address proximate cause. View "United States v. Burns" on Justia Law

Shaw used identifying numbers of Hsu's bank account in a scheme to transfer funds from that account to accounts at other institutions from which Shaw was able to obtain Hsu’s funds. Shaw was convicted under 18 U.S.C. 1344(1), which makes it a crime to “knowingly execut[e] a scheme . . . to defraud a financial institution.” The Ninth Circuit affirmed. A unanimous Supreme Court vacated and remanded for consideration of whether the district court improperly instructed the jury that a scheme to defraud a bank must be one to deceive the bank or deprive it of something of value, instead of one to deceive and deprive. The Court rejected Shaw’s other arguments. Subsection (1) of the statute covers schemes to deprive a bank of money in a customer’s account. The bank had property rights in Hsu’s deposits as a source of loans from which to earn profits or as a bailee. The statute requires neither a showing that the bank suffered ultimate financial loss nor a showing that the defendant intended to cause such loss. Shaw knew that the bank possessed Hsu’s account, Shaw made false statements to the bank, Shaw believed that those false statements would lead the bank to release from that account funds that ultimately, wrongfully ended up with Shaw. Shaw knew that he was entering into a scheme to defraud the bank even if he was not familiar with bank-related property law. Subsection (2), which criminalizes the use of “false or fraudulent pretenses” to obtain “property . . . under the custody or control of” a bank, does not exclude Shaw’s conduct from subsection (1). View "Shaw v. United States" on Justia Law

Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b–5 prohibit undisclosed trading on inside corporate information by persons bound by a duty not to exploit that information for their personal advantage. These persons are also forbidden from tipping inside information to others for trading. The Supreme Court has held (Dirks) that tippee liability hinges on whether the tipper disclosed the information for a personal benefit; personal benefit may be inferred where the tipper receives something of value in exchange for the tip or “makes a gift of confidential information to a trading relative or friend.” Salman was convicted for trading on inside information he received from Kara, who had received the information from his brother, Maher, a former investment banker at Citigroup. Maher testified that he expected his brother to trade on the information. Kara testified that Salman knew the information was from Maher. While Salman’s appeal was pending, the Second Circuit decided that personal benefit to the tipper may not be inferred from a gift of confidential information to a trading relative or friend, unless there is “proof of a meaningfully close personal relationship … that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature.” The Ninth Circuit declined to follow the Second Circuit. A unanimous Supreme Court affirmed. When an insider gives a trading relative or friend confidential information, the situation resembles trading by the insider himself followed by a gift of the profits to the recipient. Maher breached his duty to Citigroup and its clients—a duty acquired and breached by Salman when he traded on the information, knowing that it had been improperly disclosed. View "Salman v. United States" on Justia Law

Defendants Ahmed A. Algahaim and Mofaddal M. Murshed appealed their convictions for offenses concerning the misuse of benefits under the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). The court affirmed the convictions and sentence. The court remanded to permit the sentencing judge to consider non-Guidelines sentences in view of the significant effect of the loss enhancement in relation to the low base offense level. View "United States v. Murshed (Algahaim)" on Justia Law

Former DeKalb County Chief Executive Officer W. Burrell Ellis, Jr. was indicted in 2013 on fifteen counts of attempted extortion and other acts of alleged corruption. He was re=indicted in early 2014 on thirteen counts relating to attempted extortion, theft, coercion, bribery and perjury. The first indictment was nolle prossed, and his first trial ended in a mistrial. Ellis was retried in 2015 on nine counts: four counts of attempt to commit theft by extortion, three counts of perjury, one count of bribery and one count of theft by extortion. The extortion charge came from Ellis' alleged attempt to procure a $2500 political campaign contribution from a DeKalb County vendor by threatening to cut the vendor's contract with the County if the Vendor did not pay. The perjury charges stemmed from Ellis allegedly lying to a Special Purpose Grand Jury about his role in cutting the contract of the same DeKalb County vendor. On appeal, Ellis contended, among other things, that his rights to substantive due process and equal protection of the laws were violated based on the inapplicability of the former version of OCGA 45-11-4 to his case, and that the trial court erred with respect to various evidentiary matters at his trial. The Supreme Court found that, although the trial court properly concluded that the inapplicability of former OCGA 45-11-4 to Ellis’ case did not result in any violation of his constitutional rights, the Court nevertheless reversed Ellis’ convictions based on certain evidentiary errors that occurred at his trial. Accordingly, the Court affirmed in part and reversed in part to allow for a retrial on the charges of criminal attempt to commit theft by extortion and perjury. View "Ellis v. Georgia" on Justia Law

Defendant pleaded guilty to one count of mail fraud arising from a scheme in which he overpaid for commodities to the benefit of certain customers while managing a grain elevator for Bunge. The district court ordered defendant to pay $1,561,516.25 in restitution to Bunge, which included $87,536.65 in attorney's fees and expenses Bunge paid to an outside counsel during the investigation of defendant's fraudulent scheme and his prosecution. The court affirmed the portion of the district court's restitution award which does not include attorney's fees; vacated the portion awarding attorney's fees and expenses; and remanded to the district court to specifically address whether the attorney's fees incurred after the government initiated its own investigation were "necessary" under 18 U.S.C. 3663A(b)(4). View "United States v. Carpenter" on Justia Law

Appellant Michael R. Veon, a twenty-two-year member and eventual Minority Whip of the Pennsylvania House of Representatives, was entitled to $20,000 annually to cover business expenses associated with maintenance of a district office, as well as $4,000 for postage. Pursuant to House Democratic Caucus (“Caucus”) procedures, Veon could seek additional funds from Caucus leadership if he exhausted his $20,000 allocation, and it was not uncommon for Caucus members to do so. In 1991, Veon formed the Beaver Initiative for Growth (“BIG”), a non-profit corporation. BIG received all of its funding from public sources, primarily through the Pennsylvania Department of Community and Economic Development (“DCED”). Veon's Beaver County district office initially shared space with BIG, but opened two more district offices, for which the rent easily exceeded his caucus allotment. Veon was criminally charged with various offenses relating to BIG paying the district offices' rents. After some charges were withdrawn, Veon went to trial on nineteen counts. In the portion of the jury charge that was relevant to Veon’s appeal to the Supreme Court, the trial court defined the pecuniary requirement in the conflict of interest statute. The statute prohibited public officials from leveraging the authority of their offices for “private pecuniary benefit;” at issue here was whether or not that benefit extended to what the trial court in this case referred to as “intangible political gain.” In addition, another issue before the Supreme Court was whether the Commonwealth could receive restitution following prosecution of a public official for a crime involving unlawful diversion of public resources. The Court concluded the trial court committed prejudicial error in its jury charge regarding conflict of interest, and that it erred in awarding restitution to the DCED. Veon's judgment of sentence was vacated, the matter remanded for a new trial on conflict of interest, and for other proceedings. View "Pennsylvania v. Veon" on Justia Law

Attorney Goodson received an email from “Fumiko Anderson,” stating that she wanted to hire Goodson to recover money that she was owed in a divorce. Fumiko later stated that her ex-husband had agreed to settle and would mail a check to cover Goodson’s fee plus the settlement amount. The check was drawn on the First American account of an Illinois manufacturer. Goodson deposited the $486,750.33 check in his Citizens Bank client trust account. Fumiko told Goodson she needed the money immediately. Goodson directed the bank to transfer it to a Japanese entity that he believed to be Fumiko. It actually was an Internet-based fraudulent scheme: the “Fumiko Bandit.” When the fraud was discovered First American reimbursed its depositor and sought recovery from Citizens Bank, Goodson, and the Federal Reserve Bank. The Seventh Circuit affirmed judgment for the defendants, rejecting a breach of warranty argument. First American had received a “truncated” electronic image from the Federal Reserve but could have demanded a “substitute check” or could have refused to honor the check. First American was the victim of a mistake, but Illinois law provides no remedy for such a victim against “a person who took the instrument in good faith and for value.” The lawyer and the banks reasonably believed that they were engaged in the commonplace activity of forwarding a check; they did not fall below “reasonable commercial standards of fair dealing.” There was no “negligent spoliation of evidence” in Citizens Bank’s destruction of the original paper check. Goodson owed no professional duty to First American. View "First American Bank v. Federal Reserve Bank of Atlanta" on Justia Law