Justia White Collar Crime Opinion Summaries

KBP is a Polish entity, formed to develop a business park near Krakow. Plaintiffs are KBP shareholders and defendants are either current or former shareholders. The plaintiffs alleged a fraudulent scheme to loot the company by payments for services never performed and sought relief under RICO, 18 U.S.C. 1962(a)–(d), with supplemental state claims for fraud, conversion, breach of fiduciary duty, tortious interference with prospective business advantage, civil conspiracy, violation of the Illinois Uniform Fraudulent Transfer Act, and for an accounting. The defendants allegedly invested some of their proceeds in a Chicago subdivision. Polish authorities charged the defendants for crimes related to KBP. In the RICO civil suit, the defendants’ abuse of the discovery process resulted in several sanctions rulings; when the plaintiffs objected to the magistrate’s relatively lenient decisions, the district judge found the sanctions too light and imposed more onerous ones, including contempt and an order barring the defendants from using certain evidence, and ultimately a $413,000,000 default judgment. The Seventh Circuit affirmed.View "Domanus v. Lewicki" on Justia Law

Chhibber, an internist, operated a walk‐in medical office on the south side of Chicago. For patients with insurance or Medicare coverage, Chhibber ordered an unusually high volume of diagnostic tests, including echocardiograms, electrocardiograms, pulmonary function tests, nerve conduction studies, carotid Doppler ultrasound scans and abdominal ultrasound scans. Chhibber owned the equipment and his staff performed the tests. He was charged with eight counts of making false statements relating to health care matters, 18 U.S.C. 1035, and eight counts of health care fraud, 18 U.S.C. 1347. The government presented witnesses who had worked for Chhibber, patients who saw him, and undercover agents who presented themselves to the Clinic as persons needing medical services. Chhibber’s former employees testified that he often ordered tests before he even arrived at the office, based on phone calls with staff. Employees performed the tests themselves with little training, and the results were not reviewed by specialists; normally, the tests were not reviewed at all. Chhibber was convicted of four counts of making false statements and five counts of health care fraud. The Seventh Circuit affirmed, rejecting challenges to evidentiary rulings.View "United States v. Chhibber" on Justia Law

In 2000, Marr’s father founded Equipment Source, which sold used forklifts. Marr managed sales and daily operations, advertising online and selling online or by phone. In 2002, his father opened a merchant account at Palos Bank, to process credit card transactions, with Marr as a signatory. Marr sold forklifts that he never owned or possessed. Customers would contact Marr to complain that they received an invoice and notice of shipment, and that Equipment Source charged the credit card, but that the forklift never arrived. While Marr gave varying explanations, he rarely refunded money or delivered the forklifts. Customers had to contact their credit card companies to dispute the charges. The credit card company would send notice of the dispute to Palos Bank, which noticed a high incidence of chargebacks on Equipment Source’s merchant account and eventually froze the company’s accounts. Its loss on Equipment Source’s merchant account was $328,881.89. In 2003, the FBI executed a search warrant at Equipment Source’s offices and Equipment Source ceased doing business. Eight years later, the government charged Marr with six counts of wire fraud. At trial, the government presented testimony from 14 customers who paid for forklifts but never received them; two bank employees who dealt with chargebacks, and a financial expert witness, who confirmed the $328,881.89 loss. The Seventh Circuit affirmed Marr’s conviction, rejecting arguments that the government relied upon improper propensity evidence, that jury instructions incorrectly explained the law, and that the district court lacked the authority to order restitution. View "United States v. Marr" on Justia Law

After a jury trial, Appellant, who provided tax preparation and filing services, was convicted of ten counts of submitting fraudulent federal tax returns to the Internal Revenue Service (IRS). The First Circuit affirmed, holding that the district court did not err by (1) finding that an instruction preventing the jury from considering a co-worker’s criminal conduct as propensity evidence under Fed. R. Evid. 404(b) was harmless error; (2) declining to strike the summary testimony of a certain IRS agent; and (3) refusing to grant Appellant’s motion for acquittal on Count Eight, which involved a tax return filed on behalf of George Melo, pursuant to Fed. R. Crim. P. 29. View "United States v. Ulloa" on Justia Law

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

Massuda invested $4,000,000 in Concessions, Inc., which was part owner, with Tony Rezko, of a group of Panda Express restaurants. Rezko, who controlled several companies, hoped to expand the business. Rezko was indicted and convicted on federal fraud and bribery charges, for which he received a lengthy prison sentence in 2011. Rezko’s real estate ventures collapsed. Massuda filed suit against Rezko’s corporations and associated people, raising claims of unjust enrichment, fraud, and aiding and abetting a breach of fiduciary duty. The district court concluded that all of Massuda’s claims, except portions of her fraud claim, were derivative, and on that ground dismissed those counts with prejudice for failure to state a claim. Massuda declined to amend her fraud allegations, which were then dismissed. The Seventh Circuit affirmed, rejecting a claim that if the holder of a majority interest acts in a way that helps him and hurts the minority, there is a direct claim. A direct claim exists when a majority shareholder engages in wrongdoing in such a way as to dilute the voting power of the minority shareholders; a dilution of voting power is a direct harm to the shareholders that is not felt by the company. View "Massuda v. Panda Express Inc." on Justia Law

Locke and co‐conspirator engaged in real estate fraud. Locke’s presentence report recommended a 16-point addition to the offense level, calculating a loss of $2,360,914.51 based on all of the properties underlying 15 original counts, although 10 counts had been dismissed. She made a written objection. The probation office argued that relevant conduct could be considered in determining the loss amount, but that even if the loss amount was based solely on Locke’s convicted conduct, the loss amount would exceed $1 million. At sentencing, Locke’s lawyer stated that he was withdrawing the objection to the loss calculation. The district court sentenced Locke to 71 months and ordered her to pay $2,360,916.51 in restitution to 13 entities. The Seventh Circuit remanded, finding that the district court did not make the findings necessary when using relevant conduct to increase the sentence and were insufficient under the Mandatory Victim Restitution Act, 18 U.S.C. 3663A. On remand, Locke successfully moved to bar any evidence regarding relevant conduct not already in the record at the first sentencing. The district court recalculated without the two‐level enhancement for offenses involving 10 or more victims. Locke admitted that she had withdrawn her objections to the amount of loss in the first sentencing, but asserted that her loss amount should not be greater than the restitution amount calculated without regard to relevant conduct. The district court sentenced Locke to 57 months of imprisonment and ordered her to pay $340,789 in restitution, reduced by the amount recovered from sales of the property. The Seventh Circuit discussed the factors that distinguish loss and restitution, but affirmed Locke’s sentence based on waiver.View "United States v. Locke" on Justia Law

The Ho-Chunk Nation, a federally recognized Indian Tribe, operates casinos in Wisconsin and nets more than $200 million annually from its gambling operations. Cash Systems, one of three businesses involved in this case, engaged in issuing cash to casino customers via automated teller machines and kiosks, check-cashing, and credit- and debit-card advances. Whiteagle, a member of the Nation, held himself out as an insider and offered vendors an entrée into the tribe’s governance and gaming operations. Cash Systems engaged Whiteagle in 2002 as a confidential consultant. Cash Systems served as the Nation’s cash-access services vendor for the next six years, earning more than seven million dollars, while it paid Whiteagle just under two million dollars. Whiteagles’s “in” was his relationship with Pettibone, who had been serving in the Ho-Chunk legislature since 1995. Ultimately, Whiteagle, Pettibone, and another were charged with conspiracy (18 U.S.C. 371) to commit bribery in connection with the contracts with the Ho-Chunk Nation and substantive bribery (18 U.S.C. 666). Whiteagle was also charged with tax evasion and witness tampering. Pettibone pleaded guilty to corruptly accepting a car with the intent to be influenced in connection with a contract. Whiteagle admitted that he had solicited money and other things of value for Pettibone from three companies, but denied actually paying bribes to Pettibone and insisted that he and Pettibone had advocated for Whiteagle’s clients based on what they believed to be the genuine merits of those clients. Convicted on all counts, Whiteagle was sentenced, below-guidelines, to 120 months. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence on the bribery charges, the loss calculation, and admission of certain evidence.View "United States v. Whiteagle" on Justia Law

In 2009, Sheth, a cardiologist, pled guilty to a single count of healthcare fraud, 18 U.S.C. 1347. As agreed by Sheth, the district court entered an order of criminal forfeiture for cash and investment accounts then valued at $13 million plus real estate and a vehicle. The government represented that the forfeited assets represented the proceeds of Sheth’s fraud, calculated to be about $13 million. Sheth’s plea agreement specifies that forfeited assets would be credited against the amount of restitution, which the district court had determined to be $12,376,310. In 2012, before the government had liquidated all of the forfeited assets or disbursed any of the proceeds, it sought more of Sheth’s assets to apply to restitution. Sheth objected. Without resolving the factual dispute, the district court ordered turnover of the assets, which were held by third parties. The Seventh Circuit vacated, holding that the court erred by ordering turnover of the assets without first allowing for discovery and holding an evidentiary hearing. View "United States v. Sheth" on Justia Law

FutureSelect invested nearly $200 million in the Rye Funds, which pooled and fed money into Bernard Madoff's fraudulent securities investment scheme. The investments were lost when Madoff's fraud collapsed. FutureSelect sued Tremont Group Holdings (proponent of the Rye Funds), Oppenheimer Acquisition Corporation and Massachusetts Mutual Life Insurance Company (Tremont's parent companies) and Ernst & Young, LLP (Tremont's auditor) for their failure to conduct due diligence on Madoff's investments. The trial court dismissed on the pleadings, finding Washington's security law did not apply, and that Washington courts lacked jurisdiction over Oppenheimer. The Court of Appeals reversed, and the defendants sought to reinstate the trial court's findings. Finding no error with the Court of Appeals' decision, the Washington Supreme Court affirmed. View "Futureselect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc." on Justia Law