Justia White Collar Crime Opinion Summaries

This case arose from a Ponzi scheme perpetrated by Marsha Schubert, operating as "Schubert and Associates" (Schubert). Defendants Marvin and Pamela Wilcox were among the appellants in an earlier case that appealed summary judgments obtained by the plaintiffs on the theory of unjust enrichment against 158 "relief" defendants who had received more money than they invested in the scheme. Plaintiffs had sought to recover all amounts the relief defendants had received from the scheme in excess of their original investment. On remand, the state Department of Securities and the Receiver (Department) moved for summary judgment against the Wilcoxes on grounds that they were not entitled to the equitable relief provided for innocent investors because they were partners with Schubert and were actively involved in the check-kiting scheme operated by Schubert that supported the Ponzi scheme. In response, the Wilcoxes disputed that they were partners with Schubert. They stated that they were not aware of the existence of a Ponzi scheme in their dealings with Schubert. The trial judge granted partial summary judgment in favor of the plaintiffs on the issue of liability, finding that there was no genuine issue of material fact pertaining to the liability of the Wilcoxes on the Department's unjust enrichment claim. The trial judge found that by virtue of their participation in the Schubert check-kiting scheme, the Wilcoxes were not innocent investors. The trial court found that the Wilcoxes were unjustly enriched by all monies netted from their association with Schubert's Ponzi and check-kiting schemes. The Wilcoxes appealed to the Supreme Court. Upon review, the Supreme Court found that the evidentiary material provided by the Wilcoxes failed to raise disputes to meet their burden to overcome the motion for summary judgment. Accordingly, the Court affirmed the trial court's decision. View "Depart. of Securities ex rel. Faught v. Wilcox" on Justia Law

Defendant Money & More Inc. (M&M) allegedly maintained and operated a Ponzi scheme. Pursuant to a petition filed by the State, the district court issued a temporary restraining order freezing Defendants' assets and later entered a preliminary injunction. Several hundred individuals and dozens of corporations that made fraudulent investments formed Money & More Investors LLC (MMI) and assigned to it their rights, interests, and claims against Defendants, who included the individuals comprising M&M. After reaching a settlement agreement with Defendants, MMI filed a motion to intervene in the State's preservation action. The district court granted MMI both intervention as of right under Utah R. Civ. P. 24(a) and, in the alternative, permissive intervention under Utah R. Civ. P. 24(b). The Supreme Court affirmed the grant of intervention as of right, holding that MMI met all the elements of rule 24(a) where (1) MMI's motion to intervene was timely; (2) MMI had a direct interest relating to the property; (3) MMI sufficiently established that the original parties to the suit would inadequately represent MMI's interests; and (4) MMI would be bound by the judgment.View "State v. Bosh" on Justia Law

In 2005, Weight Watchers discovered that its bookkeeper, Dianne Belk, had embezzled nearly $1,000,000 from the business over a six-year period. Belk embezzled the money by writing checks to herself from Weight Watchers accounts. She concealed her writing of unauthorized checks by inputting legitimate vendors' names in the computerized bookkeeping system as the ostensible payees. However, Belk would type her name as payee on the paper checks. Belk then would cash the checks at local banks and casinos, including the Rainbow Casino, and she often would gamble with the embezzled money. Belk reported her winnings to the Internal Revenue Service via W-2G forms provided by the casino, and she paid taxes on those winnings. According to the complaint, Belk lost roughly $240,000 of the stolen funds to Rainbow Casino. More than three years after first learning of Belk's embezzlement activities, Weight Watchers filed suit against Belk, Robert Belk, Jr. (Dianne's husband), Rainbow Casino-Vicksburg Partnership, L.P., Bally Technologies Inc. (the casino's management company),and five John Doe defendants. Weight Watchers' claims against Rainbow Casino and Bally Technologies were based on fraud, unjust enrichment, conversion, and negligence. Rainbow moved for summary judgment, arguing that the three-year statute of limitations had begun to run in 2005 when Weight Watchers first learned that Belk had been cashing unauthorized checks at the casino. Rainbow also argued, in the alternative, that summary judgment was appropriate because the casino was a holder in due course and that it did not have a legal duty to investigate the circumstances surrounding issuance of the checks. In this appeal, the Supreme Court was asked to determine whether the statute of limitations barred an action against a casino for its alleged involvement in an embezzlement scheme. Finding that the Weight Watchers failed to provide any evidence of fraudulent concealment by the casino, the Court agreed with the trial court that the statute of limitations had run at the time the suit was filed.View "WW, Inc. v. Rainbow Casino-Vicksburg Partnership, LP" on Justia Law

This case involved serious allegations against Robert E. Stark, the auditor-controller of Sutter County where the Sutter County District Attorney's Office claimed that Stark violated statutes, county rules, and Sutter County Board of Supervisors (Board) resolutions detailing the requirements of his office. At issue were four provisions of Penal Code section 424, all of which proscribe general intent offenses. Three of those provisions criminalize acting without authority or failing to act as required by law or legal duty. The court held that those offenses additionally required that defendant knew, or was criminally negligent in failing to know, the legal requirements that governed the act or omission. The court also held that a claim of misinstruction on the mens rea of a crime could be challenged under Penal Code section 995, subdivision (a)(1)(B) where it raised the possibility that, as instructed, the grand jury could have indicted on less than reasonable or probable cause. The court further held that based on the record, the court need not decide the question of whether willful misconduct under Government Code section 3060 required a knowing and purposeful refusal to follow the law. Stark did not disagree with the instruction on mental state given by the district attorney and accompanying PowerPoint slides invalidated the instruction on mental state, requiring that the accusation be set aside. The court addressed these claims as to the district attorney's argument and PowerPoint slides and concluded that it was without merit. The court finally held that, in a motion to set aside an indictment or accusation, a defendant claiming that the district attorney suffered from a conflict of interest during the grand jury proceeding must establish that his right to due process was violated. Accordingly, the judgment of the district court was affirmed.View "Stark v. Superior Court of Sutter County" on Justia Law

Helen Holton, a member of the Baltimore City Council, was charged with bribery, malfeasance in office, nonfeasance in office, and perjury. The circuit court granted Holton's motion to dismiss those charges on the ground of legislative privilege. The court of special appeals affirmed the ruling. At issue was whether Md. Code Ann., Cts. & Jud. Proc. 5-501, which protects local legislators from civil or criminal actions based on words spoken at a board or committee meeting, provided Holton with immunity. The Court of Appeals granted the State's petition for writ of certiorari. The Court affirmed the judgment of the court of special appeals, holding that the lower court did not err in holding that section 5-501 provides legislative immunity to local officials in state criminal prosecutions other than prosecutions for defamation. View "State v. Holton" on Justia Law

Defendant Charles Blunt appealed a district court order that denied his motion for a new trial. He argued the court erred in denying his motion for a new trial because the State violated procedural discovery rules. Defendant was the Executive Director of Workforce Safety and Insurance ("WSI") from 2004 to 2007. The State Auditor's Office conducted a performance review of WSI in 2006, and the Auditor's report questioned the use of public funds at WSI. As a result of the Auditor's report, Defendant was charged with two counts of misapplication of entrusted property in violation of state law. State rules of procedure hold that if the State fails to disclose certain discoverable information to a criminal defendant, the trial court has discretion in applying a remedy when a violation of the rule has been shown. Without a showing of an abuse of the court's discretion, the issue is not appealable. Although the Supreme Court concluded the State likely violated the discovery rules, a careful review of the entire record reflected that the information contained in the undisclosed documents was contained in other documents provided to Defendant. Furthermore, the Court concluded that Defendant did not establish he was prejudiced by the violations. Accordingly, the Court affirmed the trial court's denial of Defendant's motion for a new trial.View "North Dakota v. Blunt" on Justia Law

Plaintiffs sued the former spouse of Stephen Walsh, who was a defendant in related actions brought by plaintiffs, alleging that the property derived from Walsh's illegal securities activities went into the former spouse's possession under the parties' separation agreement and divorce decree. At issue, in certified questions to the court, was whether the former spouse had a legitimate claim to those funds, which would prevent plaintiffs from obtaining disgorgement from her. The court held that an innocent spouse who received possession of tainted property in good faith and gave fair consideration for it should prevail over the claims of the original owner or owners consistent with the state's strong public policy of ensuring finality in divorce proceedings.View "Commodity Futures Trading Commission v. Walsh, et al." on Justia Law

The bank fraud statute, 18 U.S.C. 1344(2), makes it a crime to “knowingly execut[e] a scheme ... to obtain” property owned by, or under the custody of, a bank “by means of false or fraudulent pretenses.” Loughrin was charged with bank fraud after he was caught forging stolen checks, using them to buy goods at a Target store, and then returning the goods for cash. The district court declined to give Loughrin’s proposed jury instruction that section 1344(2) required proof of “intent to defraud a financial institution.” A jury convicted Loughrin. The Tenth Circuit and Supreme Court affirmed. Section 1344(2) does not require proof that a defendant intended to defraud a financial institution, but requires only that a defendant intended to obtain bank property and that this was accomplished “by means of” a false statement. Imposing Loughrin’s proposed requirement would prevent the law from applying to cases falling within the statute’s clear terms, such as frauds directed against a third-party custodian of bank-owned property. The Court rejected Loughrin’s argument that without an element of intent to defraud a bank, section 1344(2) would apply to every minor fraud in which the victim happens to pay by check, stating that the statutory language limits application to cases in which the misrepresentation has some real connection to a federally insured bank, and thus to the pertinent federal interest. View "Loughrin v. United States" on Justia Law

Robers, convicted of submitting fraudulent mortgage loan applications to two banks, argued that the district court miscalculated his restitution obligation under the Mandatory Victims Restitution Act of 1996, 18 U.S.C. 3663A–3664, which requires property crime offenders to pay “an amount equal to ... the value of the property” less “the value (as of the date the property is returned) of any part of the property that is returned.” The court ordered Robers to pay the difference between the amount lent to him and the amount the banks received in selling houses that had served as collateral. Robers argued that the court should have reduced the restitution amount by the value of the houses on the date on which the banks took title to them since that was when “part of the property” was “returned.” The Seventh Circuit and a unanimous Supreme Court affirmed. “Any part of the property ... returned” refers to the property the banks lost: the money lent to Robers, not to the collateral the banks received. Because valuing money is easier than valuing other property, this “natural reading” facilitates the statute’s administration. For purposes of the statute’s proximate-cause requirement, normal market fluctuations do not break the causal chain between the fraud and losses incurred by the victim. Even assuming that the return of collateral compensates lenders for their losses under state mortgage law, the issue here is whether the statutory provision, which does not purport to track state mortgage law, requires that collateral received be valued at the time the victim received it. The rule of lenity does not apply here. View "Robers v. United States" on Justia Law

After a grand jury indicted the Kaleys for reselling stolen medical devices and laundering the proceeds, the government obtained a restraining order against their assets under 21 U.S.C. 853(e)(1), to “preserve the availability of [forfeitable] property” while criminal proceedings are pending. An order is available if probable cause exists to think that a defendant has committed an offense permitting forfeiture and the disputed assets are traceable or sufficiently related to the crime. The Kaleys moved to vacate the order, to use disputed assets for their legal fees. The district court allowed them to challenge traceability to the crimes but not the facts supporting the underlying indictment. The Eleventh Circuit and Supreme Court affirmed. In challenging a section 853(e)(1) pre-trial seizure, an indicted defendant is not entitled to contest the grand jury determination of probable cause to believe the defendant committed the crimes. A probable cause finding sufficient to initiate prosecution for a serious crime is conclusive and, generally, a challenge to the reliability or competence of evidence supporting that finding will not be heard. A grand jury’s probable cause finding may effect a pre-trial restraint on a person’s liberty or property. Because the government’s interest in freezing potentially forfeitable assets without an adversarial hearing about the probable cause underlying criminal charges and the Kaleys’ interest in retaining counsel of their own choosing are both substantial, the issue boils down to the “probable value, if any,” of a judicial hearing in uncovering mistaken grand jury probable cause findings. The legal standard is merely probable cause, however, and the grand jury has already made that finding; a full-dress hearing will provide little benefit. View "Kaley v. United States" on Justia Law