Justia White Collar Crime Opinion Summaries

Clark, the owner and president of an East St. Louis Illinois company, was charged with making false statements in violation of 18 U.S.C. 1001(a)(3). Clark’s company had entered into a hauling services subcontract with Gateway, general contractor on a federally funded highway project in St. Louis, Missouri. Employers must pay laborers working on certain federally-funded projects the “prevailing wage,” calculated by the Secretary of Labor based on wages earned by corresponding classes of workers employed on projects of similar character in a given area, and maintain payroll records demonstrating prevailing wage compliance, 40 U.S.C. 3142(b) The indictment charged that Clark submitted false payroll records and a false affidavit to Gateway, representing that his employees were paid $35 per hour, when they actually received $13-$14 per hour. The district court dismissed for improper venue, finding that when a false document is filed under a statute that makes the filing a condition precedent to federal jurisdiction, venue is proper only in the district where the document was filed for final agency action. The Seventh Circuit reversed. Although the effects of the alleged wrongdoing may be felt more strongly in Missouri than in Illinois, the Southern District of Illinois is a proper venue. View "United States v. Clark" on Justia Law

Bauer served as an officer in investment companies, on the pricing committee, and as chief compliance officer, implementing policies to prohibit employees from trading on nonpublic information regarding the securities held in the companies’ portfolios. Following trades for her personal account, the Securities and Exchange Commission charge Bauer with insider trading in connection with mutual fund redemption. The district court granted the SEC summary judgment. The Seventh Circuit reversed, noting that the SEC rarely brings insider trading claims in connection with mutual fund redemption and that no federal court has ruled on the issue. The district court must determine whether Bauer’s alleged conduct properly fits under the misappropriation theory of insider trading, under which a corporate outsider misappropriates confidential information for securities trading purposes in breach of a duty owed to the source of the information. The court noted that Bauer did not argue that mutual fund redemptions cannot entail deception under the classical theory, but conceded that insider trading liability could attach to mutual fund redemptions if it could be shown that she knew the product was priced incorrectly, but that the issue must be resolved at the trial court level. View "Sec. & Exch. Comm'n v. Bauer" on Justia Law

Defendant was convicted of conspiracy to commit honest-services wire fraud. The conviction arose out of his work for former United States Representative Curt Weldon where defendant intentionally failed to disclose certain payments made to his wife. After the Supreme Court handed down Skilling v. United States, a decision that substantially limited the permissible reach of the honest-services fraud statute, defendant filed a motion under 28 U.S.C. 2255 to vacate and set aside his conviction and sentence. The court concluded that defendant was denied an opportunity to collaterally attack his conviction and sentence because he could not demonstrate that he was also innocent of a separate and uncharged offense that had a lower sentencing range under the Sentencing Guidelines. The court reversed the order denying defendant's motion to vacate his conviction because defendant was not required to make such a showing. View "United States v. Caso, Jr." on Justia Law

In 1990 Plummer, a recognized expert in horse-breeding and the tax consequences of related investments, created the Mare Lease Program to enable investors to participate in his horse-breeding business and take advantage of tax code provision classification of horse-breeding investments as farming expenses, with a five-year net operating loss carryback period instead of the typical two years, 26 U.S.C. 172(b)(1)(G). Plummer’s investors would lease a mare, which would be paired with a stallion, and investors could sell resulting foals, deducting the amount of the initial investment while realizing the gain from owning a thoroughbred foal. If they kept foals for at least two years, the sale qualified for the long-term capital gains tax rate, 26 U.S.C. 1231(b)(3)(A). Between 2001 and 2005, the Program generated more than $600 million. Law and accounting firms hired by defendants purportedly vetted the Program. Plummer and other defendants began funneling Program funds into an oil-and-gas lease scheme. It was later discovered that the Program’s assets were substantially overvalued or nonexistent. Investors sued under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(c), also alleging fraud and breach of contract. The district court granted summary judgment and awarded $49.4 million with prejudgment interest of $15.6 million. The Sixth Circuit affirmed, stating that there was no genuine dispute over any material facts. View "West Hills Farms, LLC v. ClassicStar Farms, Inc." on Justia Law

Eight defendants who held positions with Clay County, Kentucky, were charged with conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(d), based on participation in a vote-buying scheme in three election cycles, 2002 to 2007. Candidates pooled money to pay “vote haulers” to deliver voters for a particular slate of candidates. To ensure that they voted for the correct slate, co-conspiring election officers and poll workers reviewed the ballots. When the proper slate was confirmed, the voter got a token or marking and was paid in a location away from the polls. Conspirators retained lists to avoid double payments and to keep track of whose votes could be bought in future elections and used absentee voting and voter-assistance forms to implement the scheme. When electronic voting machines were introduced, conspiring poll workers misinformed voters that they did not need to click “cast ballot” after selecting candidates; poll workers would enter the voting booth after the voter exited and change the electronic ballot to reflect the slate before casting the ballot. The Clay County Board of Elections was alleged to be the racketeering enterprise in the conspiracy. They were convicted after a seven week trial. The Sixth Circuit vacated, based on cumulative errors in evidentiary rulings. View "United States v. Adams" on Justia Law

Defendant, the founder and former CEO of HealthSouth, was found guilty of federal funds bribery, honest services fraud, and conspiracy to commit the latter offenses. Defendant subsequently appealed the district court's denial of his motion for a new trial filed while Siegelman I was before the Supreme Court on certiorari, and the denial of his motion to recuse the trial judge. The court concluded that there was no abuse of discretion in Judge Henkle's denial of the motion to recuse under 28 U.S.C. 455(b) where the judge's ex parte meeting with the Marshals regarding a disputed factual issue did not lead an objective disinterested lay observer to entertain significant doubt about the judge's impartiality and the judge did not have personal knowledge of disputed evidentiary facts concerning the proceeding, nor was he likely to be a material witness. Addressing five of the six grounds defendant relied on in seeking a new trial, the court also concluded that there was no abuse of discretion in Judge Fuller's handling of the motion for new trial under Federal Rule of Criminal Procedure 33(b)(1). Accordingly, the court affirmed the judgment of the district court. View "United States v. Scrushy" on Justia Law

Kluger and Bauer were charged as conspirators in an insider-trading scheme in which Robinson was the third participant. The conspiracy spanned 17 years and was likely the longest such scheme in U.S. history. Kluger entered a guilty plea to conspiracy to commit securities fraud; securities fraud; conspiracy to commit money laundering; and obstruction of justice, 18 U.S.C. 371, 15 U.S.C. 78j(b) and 78ff(a); 18 U.S.C. 1956(h), 18 U.S.C. 1512(c)(2), and 18 U.S.C. 2. The plea agreement did not include a stipulation as to the guidelines sentencing range. The district court imposed a 60-month term on Count I and 144-month custodial terms on each other count, all to be served concurrently, thought to be the longest insider-trading sentence ever imposed. After a separate hearing on the same day, the court sentenced Bauer to a 60-month term on Count I and 108-month terms on each other count to be served concurrently. Robinson, who was the “middleman,” in the scheme, pled guilty to three counts and was sentenced to concurrent 27-month terms. Robinson’s sentence was far below his guidelines range of 70 to 87 months but the prosecution sought a downwards departure because Robinson was cooperating in its investigation and prosecution. The Third Circuit upheld Kluger’s sentence. View "United States v. Kluger" on Justia Law

ITT is a for-profit institution with more than 140 locations and offers post-secondary education. Leveski, who worked at the ITT campus, alleged, under the qui tam provisions of the False Claims Act, 31 U.S.C. 3730(b) that ITT knowingly submitted false claims to the Department of Education to receive funds from federal student financial assistance programs under the Higher Education Act, 20 U.S.C. 1001. The district court dismissed for lack of jurisdiction, finding that the allegations had already been publicly disclosed and that Leveski was not the original source of the allegations. The court granted sanctions of $394,998.33 against Leveski's lawyers. The Seventh Circuit reversed, finding the allegations that ITT paid illegal incentive compensation throughout Leveski’s employment as a recruiter and financial aid assistant, sufficiently distinct from prior public disclosures to give the court jurisdiction. The court noted the lack of temporal overlap with allegations by other ITT employees and Leveski’s more detailed allegations. View "Timothy J. Matusheski v. ITT Educational Services, Inc" on Justia Law

An employee benefit plan, providing healthcare benefits, believed that Walgreens fraudulently overcharged it and other insurance providers by filling prescriptions for generic drugs with a dosage form that differed from, and was more expensive than, the dosage form prescribed. The plan sued Walgreens and companies that manufactured the generic drugs at issue, claiming a scheme to defraud insurers, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961-1968. The district court dismissed for failure to state a claim. The Seventh Circuit affirmed, finding that the complaint alleged misconduct by the defendants but did not plausibly allege the type of concerted activity undertaken on behalf of an identifiable enterprise required for a successful RICO claim. RICO is not violated every time two or more participants commit a predicate crime listed in the statute. View "United Food & Commercial Workers Unions v. Walgreen Co." on Justia Law

Defendants appealed their securities fraud and conspiracy convictions stemming from their involvement in a double-blind, high-volume insider trading network that led the participants to acquire over $10 million in profits. The court held that wiretap evidence was lawfully obtained and therefore properly admitted; the jury had sufficient evidence to convict Defendant Kimelman of securities fraud; the conscious avoidance jury instructions were proper; evidence of Kimelman's rejection of a plea bargain was properly excluded; and defendants' sentences were reasonable. Accordingly, the court affirmed the convictions and sentences. View "United States v. Goffer" on Justia Law