Justia White Collar Crime Opinion Summaries

A jury convicted defendants James Sweeney II and Patrick Ryan of 65 counts of white-collar crime (all relating to the sale of securities) and found true three special allegations. The court sentenced Sweeney to 33 years and Ryan to 31 years. The court also imposed restitution. On appeal, both defendants challenged the sufficiency of the evidence on count 68 and the convictions on counts 67, 68, 69, 70, and 71, primarily involving multi-level marketing programs. Ryan also claimed various sentencing errors, including those related to fines and restitution.3 Sweeney makes similar arguments. The Court of Appeal found sufficient evidence for count 68. The Court also upheld convictions on counts 67 through 71. View "California v. Sweeney" on Justia Law

After she was unable to sell her Henderson, Kentucky house, Hargis solicited Vashaun to burn it down for a payment of $10,000, so that she could collect a settlement from her insurance company. White burned down the house in December 2007, and both were charged with conspiracy to use fire to commit wire fraud, 18 U.S.C. 844(m), and unlawful structuring of cash withdrawals, 31 U.S.C. 5313, 5324(a)(3), 5322(a). After first denying her involvement, Hargis pleaded guilty to conspiracy in exchange for the government dismissing the structuring charge. The district court imposed an above-guidelines sentence of 60 months imprisonment. The Seventh Circuit affirmed, rejecting an argument that the district court erred when it applied upward adjustments for obstruction of justice, U.S.S.G. 3C1.1, and her aggravating role in the offense,View "United States v. Hargis" on Justia Law

Malone owned a cattle feedlot. He cared for cattle, including some owned by GLS, and worked as an agent of GLS to buy cattle. Anderson was president of GLS, which was owned by others. GLS’s cattle were collateral for its loans. In 2008, the feedlot started losing money, jeopardizing Malone’s business and GLS’s loans. Malone and Anderson began kiting checks; one would write a check to the other, and before it was collected, the other would write a check back to the first. Malone was overdrawn by $400,000 in 2009. Malone and Anderson arranged to sell O’Hern 700 cattle. O’Hern paid $400,000, which Malone deposited to his overdrawn bank account. In reality, there were no cattle. Malone gave O’Hern $115,000. Unsatisfied, O’Hern visited the feedlot and removed cattle that did not belong to Malone; obtained liens on property owned by Malone and Anderson; and filed a state court civil suit. Malone pled guilty to bank fraud and money laundering. He urged the district judge to refrain from ordering restitution, arguing that O’Hern had already received full recovery and that the judge exercise her discretion under 18 U.S.C. 3663A(c)(3)(B), because the need to compensate O’Hern was outweighed by the burden of determining complex issues regarding his losses. The judge imposed restitution of $285,000, stating that she had no discretion under the Mandatory Victims Restitution Act, 18 U.S.C. 3663A.The Seventh Circuit affirmed the award as supported by the preponderance of the evidence regarding O’Hern’s loss and the cash returned to him, the only relevant factors. It would have been error for the judge to consider other amounts O’Hern may be adjudged to owe Malone or Anderson in the state court litigation.View "United States v. Malone" on Justia Law

In 2006, United States Postal Inspectors learned Crosby Powell had deposited checks stolen from the United States mail into his accounts at TCF Bank, UMB Bank, and Wells Fargo. An investigation revealed Powell had altered payee information or forged endorsements on some of the stolen checks. The United States obtained a superseding indictment charging Powell with eleven counts of uttering or possessing forged checks, and seventeen counts of possessing stolen mail. At trial, the government sought to prove the forged checks were “of an organization” by presenting evidence that each bank into which the forged checks were deposited was a federally insured bank operating in interstate commerce. The jury convicted Powell on the first eleven counts set out in the indictment. In his appeal to the Tenth Circuit, Powell raised three challenges to his convictions, all of which were raised for the first time on appeal, all of which were raised on the same premise: at no point during his possession or utterance of the forged checks were the checks "of" the banks into which they were deposited. The Tenth Circuit agreed that the forged checks were not "of" the depository banks. Because Powell did not raise his arguments before the district court, however, he was not entitled to relief unless he could "successfully run the gauntlet created by our rigorous plain-error standard of review." The Court found that Powell could not satisfy this burden as to all counts of conviction. Accordingly, the Court: (1) affirmed Powell’s convictions as to Counts 10, 13, and 20; and (2) remanded the case to the district court so it could vacate the remaining convictions and take any other necessary actions. View "United States v. Powell" on Justia Law

Snelling defrauded investors by soliciting funds for two fictitious financial companies, CityFund and Dunhill, which supposedly invested clients’ money in overseas mutual funds and overnight depository accounts, and promised investors an annual return of 10 to 15%. In reality, Snelling and his partner operated a Ponzi scheme in which “returns” on earlier investors’ capital were part of new investors’ deposits. The rest of the new deposits went to Snelling and his partner, who used the money to buy vacation houses and boats, pay private-school tuition, and live extravagantly. Among the tactics they employed were intentional targeting of victims’ IRA and 401(k) accounts, issuance of false quarterly statements by mail and, in confronting investors’ suspicions, production of false records that showed a balance of $8.5 million in the fund when it actually held $995.. Neither Snelling nor his partner paid taxes on the diverted funds. Snelling pled guilty to conspiracy to commit mail and wire fraud, 18 U.S.C. 1349; obstruction of justice, 18 U.S.C. 1519 and 2; and tax evasion, 18 U.S.C. 7201. Snelling appealed his 131-month prison sentence, claiming that the Guidelines-range calculation employed a loss figure that did not take into account the sums paid back to investors in the course of the fraud. The Sixth Circuit agreed and vacated the sentence.View "United States v. Snelling" on Justia Law

Reichert was a forum moderator for Xbox-scene.com, a website dedicated to discussion of installing “modification chips in video game consoles so that they could run software for which the consoles were not originally designed. Reichert sold an undercover agent a modified Nintendo Wii, able to play both legitimate and pirated video games. After obtaining a warrant, agents seized modification chips, a soldering iron, computers, and business cards advertising Reichert’s services. Reichert was convicted under the Digital Millennium Copyright Act, which gives copyright owners a remedy against those who do not themselves infringe a copyright, but circumvent technological controls and enable others to infringe. The Act establishes circumvention liability for digital trespass, 17 U.S.C. 1201(a)(1), and trafficking liability, 17 U.S.C. 1201(a)(2). Circumventing or trafficking in circumvention tools is a criminal offense if committed “willfully” for financial gain. With a two-point “special skills” enhancement under U.S.S.G. 3B1.3, Reichert’s advisory Guidelines range was 15 to 21 months. The district court imposed a sentence of 12 months. The Sixth Circuit affirmed, rejecting arguments that the jury received an inaccurate “deliberate ignorance” instruction that negated the “willful” conduct requirement,” that exclusion of certain defense testimony violated Reichert’s constitutional right to present a defense, and that the “special skills” enhancement should not apply to Reichert’s self-taught technical expertise.View "United States v. Reichert" on Justia Law

Morales operated IPS to defraud small businesses. His sales agents contacted business owners and offered to collect on bad checks for a small commission. The agents would tell the owners that they worked for another business, not IPS, and asked them for personal information and a voided check, ostensibly for wiring funds. With that data, IPS made unauthorized withdrawals from bank accounts through financial intermediaries, stating that the withdrawals covered payments for credit card processing equipment. IPS neither collected bad checks nor leased credit‐card processing equipment. IPS fraudulently withdrew $645,000. In 2004, a team led by Secret Service Agent Kane executed a search warrant on IPS’s office and found extensive evidence. Morales was indicted for mail fraud, 18 U.S.C. 1341. At trial, the government presented witnesses including 10 victims, forensic analysts, the IPS receptionist, and Agent Kane. Convicted, Morales was sentenced to nine years in prison. Three weeks after the trial, an assistant U.S. attorney sent Morales’s lawyer two emails from Agent Kane to government attorneys that had not previously been disclosed. One attached a screenshot from the laptop as it appeared when discovered in Morales’s office; the other responded concerning picking up a grand jury subpoena for Paulina Morales. The email included a threat to "taze" Morales’s pet, although that never happened. The court denied a motion for a new trial. The Seventh Circuit affirmed, finding any Brady violation harmless because evidence implicating Morales was overwhelming.View "United States v. Morales" on Justia Law

Defendant, a member of the board of directors of Goldman Sachs, appealed his conviction for three counts of securities fraud, in violation of 15 U.S.C. 78j(b) and 78ff, and one count of conspiracy to commit securities fraud in violation of 18 U.S.C. 371. The prosecution arose out of a multiyear government investigation of insider trading at Galleon which included court-authorized wiretaps of Galleon's founder's cell phone. The court concluded that the trial court did not err by admitting statements of a coconspirator, recorded in wiretapped telephone conversations to which defendant was not a party where the statements were admissible both as nonhearsay statements in furtherance of the conspiracy and under the exception for statements against penal interest. The court also concluded that the trial court did not abuse its discretion by excluding relevant evidence offered by defendant. Accordingly, the court found defendant's arguments on appeal were without merit and affirmed the judgment of the district court.View "United States v. Gupta" on Justia Law

Walker was involved in a mortgage fraud scheme involving at least 10 loans and seven Chicago-area properties. Walker served as both a fraudulent buyer and seller and used his then‐girlfriend as a straw purchaser in some transactions. The loans went into default and the properties were foreclosed on, causing an estimated $956,300 in loss to the lender. Walker’s attorney entered his appearance just weeks before trial and sought to investigate whether illegally-seized material from an unrelated state case (involving Walker’s arrest for possession of a gun and the ensuing search of his home) may have been the basis of the federal case The government maintained that its evidence came from lenders, title companies, financial institutions and eyewitness testimony, not from the state search. The government informed the district court that a suburban police department held the evidence and had affirmed it had no connection with or knowledge of the federal case. Walker did not attempt to obtain that evidence and was convicted of wire fraud, 18 U.S.C. 1343. The Seventh Circuit affirmed, rejecting arguments that failure to turn over the state case evidence constituted a Brady violation and that the court erred when it refused to give Walker’s proposed buyer‐seller jury instruction and in ordering restitution.View "United States v. Walker" on Justia Law

Through Amusements Inc., owned by Szaflarski, a criminal enterprise distributed “video gambling devices” to bars and restaurants. The machines allow customers to deposit money in return for virtual credits and are legal for amusement only. The enterprise and the establishments, however, permitted customers to redeem credits for cash. The devices were modified to track money coming in and payouts, so that establishment owners and the enterprise could divide the profits. When a rival company encroached on Amusements Inc.’s turf, the enterprise placed a pipe bomb outside the rival’s headquarters. In addition to gambling, the enterprise committed home and jewelry‐store robberies, fenced stolen items through Goldberg Jewelers, owned by Polchan, and dealt in stolen cigarettes and electronics. Sarno was at the top of the enterprise’s hierarchy, followed by Polchan. Volpendesto was a perpetrator of robberies. The three were indicted for conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(d). Sarno and Polchan were indicted for conducting an illegal gambling business, 18 U.S.C. 1955; and Polchan for additional counts, including use of an explosive device, conspiracy to do so, 18 U.S.C. 844(i) and (n), and conspiracy to obstruct justice, 18 U.S.C. 1512(k). Others indicted included Szaflarski and Volpendesto’s father, and two police officers. Most entered pleas. Volpendesto, Polchan, and Sarno were convicted. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence, jury instructions, evidentiary rulings, and the sentences.View "United States v. Sarno" on Justia Law