Justia White Collar Crime Opinion Summaries

The issue before the Tenth Circuit in this case stemmed from a civil-enforcement action brought by the Securities and Exchange Commission ("SEC") against Defendant-Appellant Ralph Thompson, Jr., in connection with an alleged Ponzi scheme Thompson ran through his company, Novus Technologies, L.L.C. ("Novus"). The district court granted summary judgment in favor of the SEC on several issues, including the issue of whether the instruments Novus sold investors were "securities." Thompson's single issue on appeal was that the district court ignored genuine disputes of material fact on the issue of whether the Novus instruments were securities, and that he was entitled to have a jury make that determination. After careful consideration, the Tenth Circuit concluded that under the test articulated by the U.S. Supreme Court in "Reves v. Ernst & Young" (494 U.S. 56 (1990)), the district court correctly found that the instruments Thompson sold were securities as a matter of law. View "SEC v. Thompson" on Justia Law

Investigation of Rabbi Fish began when Dwek, charged with bank fraud, informed law enforcement that several New York and New Jersey rabbis were laundering money through tax-exempt Jewish charities called gemachs. In a sting operation, Dwek approached Fish about laundering the claimed proceeds of fraudulent schemes. The “proceeds” were actually provided by the government. Fish participated in 12 money laundering transactions involving more than $900,000. Dwek would deliver bank checks made out to gemachs and rabbis and would receive cash in exchange, less a commission of about 10 percent. Fish gave Dwek SIM cards for his cell phone and warned Dwek to sweep his car and phones for detection devices and to use code when speaking to associates. In recordings made by Dwek, Fish stated that he had several money laundering connections, knew how much cash certain individuals had available at specified times, had met the “main guy” running the network, and that the cash came from the diamond and jewelry business. Fish pled guilty to conspiracy to commit money laundering, 18 U.S.C. 1956(h). The parties agreed that Fish’s total offense level would be at least 21; the government reserved the right to argue for a two-level enhancement under U.S.S.G. 2S1.1(b)(3) for sophisticated money laundering. The district court applied the enhancement and sentenced Fish to 46 months. The Third Circuit affirmed. View "United States v. Fish" on Justia Law

Jin, a naturalized American citizen of Chinese origin, with a bachelor’s degree in physics from a Chinese university and master’s degrees in physics and computer science from American universities, was employed as a Motorola software engineer, 1998-2007. Her duties involved a cellular telecommunications system: Integrated Digital Enhanced Network (IDEN). While on medical leave in China, 2006-2007, she sought a job with a Chinese company, Sun Kaisens, which develops telecommunications technology for the Chinese armed forces. She returned to the U.S., bought a one‐way ticket to China on a plane scheduled to leave Chicago days later, then downloaded thousands of internal Motorola documents, stamped proprietary, disclosing details of IDEN, which she was carrying with $31,000 when stopped by Customs agents. She stated she intended to live in China and work for Sun Kaisens. She was convicted of theft of trade secrets, but acquitted of economic espionage, under the Economic Espionage Act, 18 U.S.C. 1831, 1832, and sentenced to 48 months in prison. The Seventh Circuit affirmed, rejecting arguments that what she stole was not a trade secret and that she neither intended nor knew that the theft would harm Motorola. The court characterized the sentence as lenient, given Jin’s egregious conduct, which included repeatedly lying to federal agents.p View "United States v. Jin" on Justia Law

Satyam approached the Trust about forming a joint venture to provide engineering services to the automotive industry. Satyam represented that it was an IT-services provider with a base of automotive customers, that it was publicly-traded, audited, and financially stable. The Trust formed VGE, a separate legal entity; in 2000, VGE and Satyam formed SVES under the laws of India; VGE contributed $735,000. VGE and Satyam signed agreements calling for binding arbitration. In 2005, Satyam initiated arbitration. VGE counterclaimed that Satyam had breached its obligations. The arbitrator rejected VGE’s counterclaims, found that Satyam never competed with SVES, and found an event of default entitling Satyam to purchase VGE’s shares in the joint venture for book value. Satyam filed an enforcement action. The district court ordered VGE to comply with the award. The Sixth Circuit affirmed. Following a 2007 contempt proceeding, VGE complied. In 2010, VGE and the Trust sued, alleging that, starting before the joint venture, Satyam engaged in a massive fraud scheme about its financial stability, and claiming civil violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961–1968. The district court dismissed, based on res judicata defense, and denied leave to amend. The Sixth Circuit reversed. The complaint adequately alleged that Satyam wrongfully concealed the factual predicate to claims, so the defense of claim preclusion does not apply. View "Venture Global Eng'g, LLC v. Satyam Computer Servs., Ltd." on Justia Law

Plaintiff-Appellee John Niemi and several investors intended to build a large luxury ski condominium complex. Niemi was unable to find traditional financing for the project, and turned to Florida businessman, Defendant Michael Burgess. Burgess claimed to represent a European investor, Defendant-Appellee Erwin Lasshofer. As part of the funding scheme, plaintiff had to pay certain fees and pledge a collateral deposit before $250 million dollars would be loaned to him (and his business partners/investors) for the condo project. For his part, Burgess was eventually convicted and sentenced to federal prison for fraud and money laundering. Plaintiffs sued seeking return of the money they pledged, alleging the lost loan irreparably damaged its business, caused millions in lost profits, and sent its other real properties into foreclosure. Burgess maintained he took direction from Lasshofer; Lasshofer claimed he unwittingly did business with a con man. The district court granted plaintiffs' motion for a preliminary injunction effectively freezing Lasshofer's worldwide assets pending final judgment. Lasshofer appealed the grant of the preliminary injunction. Upon careful review, the Tenth Circuit concluded that plaintiffs, Niemi and individual investors in his condo project, lacked standing to bring suit. Therefore the district court erred in granting the injunction. The injunction was vacated and the case remanded for further proceedings. View "Niemi, et al v. Burgess, et al" on Justia Law

Defendants Jeffrey W. Edwards and Frontier Holdings appealed the district court's order of restitution under the Mandatory Victims Restitution Act, 18 U.S.C. 3663A. Edwards' convictions stemmed from his involvement in a scheme to solicit funds from investors by promising astronomical returns and then using the funds for extravagant personal expenditures. The court concluded that the district court correctly ignored Edwards' finances when determining the amount of restitution; the district court did not clearly err by ordering restitution to Camencita Jocson for losses caused by a related scheme; the district court properly found that Edwards owed restitution to victims whose related counts were dismissed at trial; and there was insufficient evidence supporting the restitution order to Teana Reece's alleged victims. Accordingly, the court affirmed the convictions; affirmed the restitution order generally; vacated the restitution order in respect to Reece's alleged victims; and remanded for a hearing to determine whether they were entitled to restitution. View "United States v. Edwards, et al." on Justia Law

After the mutual funds, known as the Lancelot or Colossus group, folded in 2008, the trustee in bankruptcy filed independent suits or adversary actions seeking to recover from solvent third parties, including the Funds’ auditor, law firm, and some of the Funds’ investors, which the Trustee believes received preferential transfers or fraudulent conveyances. The Funds had invested in notes issued by Thousand Lakes, which was actually a Ponzi scheme, paying old investors with newly raised money. In these proceedings the trustee contends that investors who redeemed shares before the bankruptcy received preferential transfers, 11 U.S.C. 547, or fraudulent conveyances, 11 U.S.C. 548(a)(1)(B) and raised a claim under the Illinois fraudulent-conveyance statute, using the avoiding power of 11 U.S.C. 544. The bankruptcy court rejected the claims, citing the statutory exception: “the trustee may not avoid a settlement payment or transfer made to a financial participant in connection with a securities contract, except under section 548(a)(1)(A) of this title.” The Seventh Circuit affirmed. A transfer from the Funds to each redeeming investor occurred “in connection with” a securities contract. View "Peterson v. Somers Dublin, Ltd." on Justia Law

Gray’s friend Johnson offered to act as co‐borrower to help Gray buy a house, if Gray promised that she would only be on the loan as a co‐borrower for two years. In return, Johnson received a finder’s fee from the daughter of the builder-seller (Hinrichs). Mortgage broker Bowling sent their application to Fremont, a federally insured lender specializing in stated‐income loans, with which the lender typically did not verify financial information supplied by applicants. Bowling testified that he told both women that they would be listed as occupants, that their incomes would be inflated, and what the monthly payment would be. The closing proceeded; Gray and Johnson received a $273,700 mortgage from Fremont and, on paper, a $48,300 second mortgage from Hinrichs. Gray and Johnson acknowledge that the application that they signed contained several false statements. Bowling became the subject of a federal investigation. Sentenced to 51 months’ imprisonment, he agreed to testify against his clients. The Seventh Circuit affirmed the convictions of Gray and Johnson under 18 U.S.C. 1014, which prohibits “knowingly” making false statements to influence the action of a federally insured institution. Rejecting an argument that the district court erred by denying an opportunity to present testimony to show Bowling’s history of duping clients, the court stated that his prior wrongdoing was not very probative of Gray’s and Johnson’s guilt. View "United States v. Gray" on Justia Law

The Criminal Justice Act, 18 U.S.C. 3006A(a), requires courts to furnish legal counsel to criminal defendants “financially unable to obtain adequate representation.” Konrad was appointed a federal defender based on information he provided in a financial disclosure affidavit. At sentencing, the district court found discrepancies between Konrad’s presentencing report and his financial disclosure and, after a hearing, found that Konrad had $70,463 in two individual retirement accounts so he was not financially unable to pay the cost of legal representation. Konrad had failed to disclose the value of his home , had significantly under-reported income, and had reported the value of the retirement accounts inaccurately. The court ordered Konrad to repay $6,000. The Third Circuit affirmed; individual retirement funds and jointly-held bank accounts can be available funds within the meaning of the Criminal Justice Act and the court acted within its discretion in ordering Konrad to repay the market value of his legal representation rather than the hourly rate paid to an attorney appointed under the Criminal Justice Act. View "United States v. Konrad" on Justia Law

After being rejected for a mortgage because Hall had a bankruptcy and their joint income was too low, Hall and Phillips applied with Bowling, a mortgage broker, under the “stated income loan program.” Bowling prepared an application that omitted Hall’s name, attributed double their combined income to Phillips, and falsely claimed that Phillips was a manager. Phillips signed the application and employment verification form. Fremont extended credit. They could not make the payments; the lender foreclosed. Bowling repeated this process often. He pleaded guilty to bank fraud and, to lower his sentence, assisted in prosecution of his clients. Phillips and Hall were convicted under 18 U.S.C. 1014. The district court prohibited them from eliciting testimony that Bowling assured them that the program was lawful and from arguing mistake of fact in signing the documents. The Seventh Circuit first affirmed, but granted rehearing en banc to clarify elements of the crime and their application to charges of mortgage fraud and reversed. The judge excluded evidence that, if believed, might have convinced a jury that any false statements made by the defendants were not known by them to be false and might also have rebutted an inference of intent to influence the bank. View "United States v. Phillips" on Justia Law