Justia White Collar Crime Opinion Summaries

Defendant-Appellant George David Gordon was a former securities attorney convicted of multiple criminal charges relating to his alleged participation in a "pump-and-dump" scheme where he (along with others) violated the federal securities laws by artificially inflating the value of various stocks, then turning around and selling them for a substantial profit. The government restrained some of his property before the indictment was handed down and ultimately obtained criminal forfeiture of that property. On appeal, Defendant raised multiple issues relating to the validity of his conviction and sentence, and the propriety of the government’s conduct (both before and after trial) related to the forfeiture of his assets. In the end, the Tenth Circuit found no reversible error and affirmed Defendant's conviction and sentence, as well as the district court’s forfeiture orders. View "United States v. Gordon" on Justia Law

In 2003, Congress created Health Savings Accounts to help people with high-deductible health plans save for health care costs by providing tax-preferred treatment for money saved for future medical expenses, 26 U.S.C. 223. Banas and others started a company that created a suite of software products that allowed savers to manage their Health Savings Accounts online. By 2009, the company had more than 100 employees. Venture capital and private equity firms thought the company was a solid investment and bought stock, but the company had provided counterfeit financial documents and had even “faked” customer calls. The owners started raiding clients’ Health Savings Accounts. By the time Banas and Blackburn were stopped, they had misappropriated more than $18,000,000 in client funds. Banas admitted his guilt, accepted responsibility for his actions, and has worked to secure some degree of restitution. The district judge sentenced Banas to 160 months of imprisonment for wire fraud, 18 U.S.C. 1343, well below the Guidelines range. The Seventh Circuit affirmed, particularly noting the impact of the crime on victims. View "Unted States v. Banas" on Justia Law

Defendant pleaded guilty to perpetrating a five-year, $3 million health care fraud scheme. In light of defendant's full restitution payment, his community service, and the rising costs of incarceration, the district court sentenced defendant to probation for the "time served" while awaiting his sentence, varying downward 20 levels. The government appealed defendant's sentence. The court concluded that the sentence did not reflect the seriousness and extent of the crime, nor did it promote respect for the law, provide just punishment, or adequately deter other similarly inclined health care providers. Therefore, the court found that the sentence was substantively unreasonable and an abuse of the district court's discretion. Accordingly, the court vacated and remanded for resentencing. View "United States v. Kuhlman" on Justia Law

The Federal Trade Commission secured a judgment of $10,204,445 against Sussman and his co-defendants and equitable relief, based on abusive debt collection activities. Sussman subsequently entered a safe deposit box and removed coins that had been “frozen” in connection with the earlier action; he was then convicted of theft of government property, 18 U.S.C. 641, and obstruction of justice, 18 U.S.C. 1503(a) and sentenced to 41 months on each count, to be served concurrently, followed by three years of supervised release. The court also imposed a $15,000 fine and a $200 special assessment. The Third Circuit affirmed, rejecting a challenge to the sufficiency of the evidence and a clam that Sussman should be afforded a new trial because a portion of the trial transcript is unavailable, apparently because a court reporter lost the transcript. The court upheld the admission into evidence of redacted documents from the FTC’s prior civil case and jury instructions on the elements of obstruction of justice and Sussman’s theory of defense. View "United States v. Sussman" on Justia Law

Defendants Michael Nouri, Eric Nouri, and Anthony Martin appealed convictions stemming from their involvement with a market manipulation scheme with Smart Online, Inc. stock. On appeal, defendants contended that the district court erred in instructing the jury on fraud by deprivation of honest services, especially in the context of securities fraud, and that there was insufficient evidence to sustain convictions for securities fraud. Martin also contended that there was insufficient evidence to convict him of honest-services wire fraud, that the district court erroneously limited his examination of a witness, and that his sentence was unreasonable. The court affirmed the judgment, finding no merit in defendants' arguments. View "United States v. Nouri" on Justia Law

In 2000 the SEC charged violation of securities law. The court appointed a receiver to distribute assets among victims of the $31 million fraud. The receiver found that assets had been used to acquire oil and gas leases. SonCo claimed an interest in the leases. In 2010, the district court issued an “agreed order,” requiring SonCo to pay $600,000 for quitclaim assignment of the leases and release of claims in Canadian litigation. Alco operated the wells and had posted a $250,000 cash bond with the Texas Railroad Commission. Alco could get its $250,000 back if replaced by new operator that posted an equivalent bond. The $250,000 had come, in part, from defrauded investors. Alco was incurring environmental liabilities, with little prospect of offsetting revenues. SonCo was to replace Alco, but failed to so, after multiple extensions. The district judge held SonCo in civil contempt, ordered it to return the leases, and allowed the receiver to keep the $600,000. The Seventh Circuit upheld the finding of civil contempt. Following remand, the Seventh Circuit affirmed the sanction; considering additional environmental compliance costs and receivership fees, a plausible estimate of the harm would be $2 million. ”SonCo will be courting additional sanctions, of increasing severity, if it does not desist forthwith from its obstructionist tactics.” View "Sec. & Exch. Comm'n v. First Choice Mgmt Servs., Inc." on Justia Law

Canopy Financial developed and marketed software for banks and health-care payers to handle health-related savings accounts and administered the health-care funds of almost 2,000 entities. When Canopy entered bankruptcy in 2009, it came to light that Banas and Blackburn had misappropriated more than $90 million from Canopy’s investors and the customers. Each was sentenced to more than 10 years’ imprisonment. Blackburn committed suicide. The Trustee for the benefit of Canopy’s creditors has recovered about $50 million by seizing assets from Blackburn’s mansion and is attempting to recover from recipients of fraudulent conveyances, transfers made while Canopy was insolvent, not in exchange for reasonably equivalent value, 11 U.S.C. 544(b), 548, 550; 740 ILCS 160/1 to 160/12. According to the Trustee, Banas and Blackburn spent more than $80,000 of Canopy’s money at a Nevada nightclub. After obtaining default judgment, the Trustee began to collect from its assets in Nevada. The owner sought to vacate the default under Rule 60(b)(1) for excusable neglect by its agent for service of process. The bankruptcy judge declined. The Seventh Circuit affirmed, noting that the owner had the burden of proof, but chose not to present any evidence about whether the agent received the essential documents. View "Buddha Entm't, LLC v. Paloian" on Justia Law

Defendant-Appellant Harald Dude secured a $1.9 million loan on his Aspen home from Washington Mutual Bank. He sought to borrow another $500,000 from Wells Fargo Bank. As part of the application process, Defendant completed a form for Wells Fargo's title insurance company, Plaintiff-Appellee Stewart Title Guaranty Company. The form required Defendant to disclose existing liens on property. Knowing that the company failed to discover the existence of the Washington Mutual loan, Defendant did not list the lien on Stewart Title's form. Wells Fargo proceeded with the second loan based on representations made on the form. Several years later, Defendant elected to sell the property. Stewart Title was contacted to provide title insurance. A second title search failed to reveal the Washington Mutual loan. The company again provided its disclosure form to Defendant who again omitted the Washington Mutual loan. At some point, Defendant stopped making payments on the Washington Mutual loan. Eventually it threatened the property's new owner with foreclosure. The new owner made a claim on her title insurance with Stewart Title. Honoring what it perceived to be its contractual obligations, Stewart Title paid Washington Mutual’s loan amount in full. Stewart Title then sued. A jury found Defendant liable for fraudulent misrepresentation. On appeal, Defendant and his company argued there was insufficient evidence to hold him liable. Finding sufficient evidence for which the jury could have found Defendant liable, the Tenth Circuit affirmed the verdict against him. View "Stewart Title v. Dude, et al" on Justia Law

Defendants are MB, a registered investment adviser, and people affiliated with MB. A fraudulent scheme was perpetrated by Bloom while he was an employee and officer of MB, through a hedge fund called North Hills that Bloom controlled and managed outside the scope of his responsibilities at MB. Bloom was arrested and indicted in New York in 2009 on charges relating to the Ponzi scheme, by which time most of the money invested in North Hills was gone. Investors filed suit, alleging: controlling person liability under Section 20(a) of the Securities and Exchange Act; negligent supervision; violations of Securities and Exchange Commission Rule 10b-5; violations of the Pennsylvania Unfair Trade Practice and Consumer Protection Law; and breach of fiduciary duty. The district court rejected all claims. The Third Circuit vacated and remanded with respect to MB on the claims for violations of Rule 10b-5 and the state UTPCPL, and otherwise affirmed. View "Belmont v. MB Inv. Partners, Inc." on Justia Law

Defendant, an engineer for battery producer Electric Vehicles Worldwide (EVW), was convicted of submitting false invoices and conspiring to defraud the Federal Transit Administration (FTA) in connection with federal grants to develop a battery for electric mass transit. The First Circuit Court of Appeals affirmed Defendant's convictions, holding (1) the government's evidence was sufficient to prove beyond a reasonable doubt that Defendant intentionally submitted false or fraudulent claims or conspired to defraud the FTA; and (2) the trial court did not err in refusing to give Defendant's requested theory-of-defense jury instructions on condonation and reasonable interpretation of regulations. View "United States v. Willson" on Justia Law