Justia White Collar Crime Opinion Summaries

In the 1990s debtors owned a business that failed and incurred liabilities from unpaid taxes. They had a monthly payment obligation to the IRS. Husband obtained employment; 2003 to 2009, his yearly gross income was between $53,000 and $59,000. In addition, he receives $1,300 per month from a settlement annuity. Wife was employed as a bookkeeper until 1999. In 2000, she pled guilty to felony embezzlement of funds from her former employer and was sentenced to probation and required to pay restitution of $800 per month. Before her indictment wife obtained employment as a bookkeeper for plaintiff, began embezzling, and deposited stolen funds to Debtors’ joint bank accounts. By 2006, she had embezzled $283,391.88 from plaintiff and forged credit card purchases of $2,821.43. In 2007, she embezzled $328,516.10. In 2008, she embezzled $11,230.21. She stole goods valued at $127,156 from her employer. Debtors spent accordingly. The Bankruptcy Court entered an order excepting debt owed to plaintiff from discharge under 11 U.S.C. 523(a)(6), finding that husband conspired with wife to convert embezzled funds and other property. The Sixth Circuit affirmed, holding that Debtors’ conduct constituted willful and malicious injury to plaintiff. View "In re: Cottingham" on Justia Law

Principals of Cybercos defrauded lending institutions out of more than $100 million in loan. In 2002, Huntington granted Cyberco a multi-million-dollar line of credit, and Cyberco granted Huntington a continuing security interest and lien in all of Cyberco's personal property, including deposit accounts. After discovering the fraud, the government seized approximately $4 million in Cyberco assets, including $705,168.60 from a Huntington Bank Account. Cyberco principals were charged in a criminal indictment with conspiring to violate federal laws relating to bank fraud, mail fraud, and money laundering. Count 10 issued forfeiture allegations against individuals regarding Cyberco assets, including the Account. In their plea agreements, defendants agreed to forfeit any interest they possessed in the assets or funds. The district court entered a preliminary order of forfeiture with regard to the assets, including the Account. Huntington filed a claim, asserting ownership interest in the forfeited Account. The district court found that Huntington did not have a legal claim. On remand, the district court again denied the claim. The Sixth Circuit reversed. A party who takes a security interest in property, tangible or intangible, in exchange for value, can be a bona fide purchaser for value of that property interest under 21 U.S.C. 853(n)(6)(B). View "United States v. Huntington Nat'l Bank" on Justia Law

Mitchell was a partner in the Cleveland law firm from the early 1980s until 2006. There was no formal partnership agreement; each partner practiced in a different area of law, and each represented his clients with essentially no oversight, but shared evenly in the firm's profits. Mitchell was indicted for his involvement in a long-running scheme to bribe the auditor of Cuyahoga County into awarding overvalued contracts for appraisal work to a company formed by his law partners. The indictment charged conspiracy to commit bribery concerning programs receiving federal funds, 18 U.S.C. 371; bribery concerning programs receiving federal funds, 18 U.S.C. 666(a)(2); and conspiracy to violate the Hobbs Act, 18 U.S.C. 1951. The district court granted Mitchell acquittal on the Hobbs Act charge, but a jury convicted him of the remaining two counts. He was sentenced to 97 months. The Sixth Circuit affirmed, rejecting a challenge to the jury instruction that deliberate ignorance, in some instances, can constitute knowledge, and a challenge to the sentence. View "United States v. Mitchell" on Justia Law

Stokes owned 1Point, which managed employee-benefits plans and 401(k) retirement plans as a third-party administrator (TPA). Most were governed by the Employee Retirement Income Security Act, 29 U.S.C. 1002. TPAs generally provide record-keeping and assist in transferring money, but do not handle money or securities. Stokes directed clients to send funds to accounts he had opened in 1Point’s name. Cafeteria plan clients deposited $45 million and 401(k) clients deposited $5.7 million in accounts at Regions. Because the accounts bore 1Point’s name, Stokes was able to transfer money. Between 2002 and 2006, Stokes stole large sums. Regions failed to comply with the Bank Secrecy Act, 31 U.S.C. 3513, requirements to report large currency transactions, file suspicious-activity reports, verify identities for accounts, and maintain automated computer monitoring. In 2004, the U.S. Financial Crimes Enforcement Network assessed a $10 million fine against Regions. In 2006, Stokes and 1Point filed for bankruptcy. The Trustee filed suit against Regions in bankruptcy court on behalf of victimized plans for which he assumed fiduciary status. The suit was consolidated with plaintiffs’ suit. The district court withdrew the Trustee’s case from bankruptcy court, dismissed ERISA claims, and found that ERISA preempted state law claims. The Sixth Circuit affirmed. View "McLemore v. Regions Bank" on Justia Law

Defendants were convicted on charges arising from an elaborate, years-long financial fraud. Defendant Gowing continued to take actions in furtherance of the conspiracy to defraud even after he was arrested and released awaiting trial for that same charge. On appeal, Gowing principally argued that the district court's application of 18 U.S.C. 3147 was error because he did not commit a separate or additional offense while on release, but only continued to commit the conspiracy. Because the statute did not make such a distinction, and because Gowing's other sentencing arguments were without merit, the court affirmed the convictions and sentences. View "United States v. Gowing" on Justia Law

Andrews was designated as contractor for improvements to the sewage system, in a no-bid process involving kickbacks and bribery, having made numerous false statements in the bond application package. After the contract was terminated, he submitted a claim of $748,304, based on false statements and duplicate charges. Evidence indicated that Andrews was not capable of the project work and that the entire scheme was fraudulent. He was convicted of one count of conspiracy, 18 U.S.C. 371, four counts of wire fraud, 18 U.S.C. 1343, 1346, and 2, one count of program fraud, 18 U.S.C. 666(a)(1)(B) and 2, one count of making a false claim upon the Government of the Virgin Islands, 14 V.I.C. 843(4), and one count of inducing a conflict of interest, 3 V.I.C. 1102, 1103, and 1107. The Third Circuit affirmed the conviction, but remanded for resentencing. Errors in the indictment and jury instructions concerning honest services fraud did not affect substantial rights. Although the 151-month term of imprisonment was within the statutory maximum for Counts Two through Five, it exceeded the statutory maximum for Counts One and Six; it was not possible to determine whether the sentence was legal as to each count View "United States v. Andrew" on Justia Law

Sheneman and his son purchased distressed properties, then flipped the properties by operating an elaborate mortgage fraud scheme that convinced unwitting buyers to purchase properties they could neither afford nor rent out after purchasing. Mortgage lenders were duped into financing the purchases through misrepresentations about the buyers and their financial stability. Four buyers with few assets and no experience in the real estate market purchased 60 homes. Most of the homes were eventually foreclosed upon. The buyers and lenders each suffered significant losses. Sheneman was convicted of four counts of wire fraud, 18 U.S.C. 1343, and sentenced to 97 months' imprisonment. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence and to application of sentencing enhancements for use of sophisticated means and for losses of more than one million dollars. View "United States v. Sheneman" on Justia Law

Defendant was convicted of various offenses stemming from an extensive mortgage fraud conspiracy. On appeal, defendant challenged the district court's evidentiary rulings, loss calculation, and order directing him to reimburse his court-appointed attorneys' fees. The court affirmed the district court's judgment on the first two issues, but vacated the court's reimbursement order. Defendant also argued that his money laundering convictions must be reversed under United States v. Santos. Applying Santos, as interpreted by United States v. Halstead, to the facts underlying defendant's substantive money laundering convictions, the court agreed and therefore reversed those convictions. View "United States v. Cloud" on Justia Law

ABC is a dissolved corporation. Doe 1 was the company’s President and sole shareholder. Doe 2 is his son. LaCheen represents ABC and Doe 1; Blank represents Doe 2. The law firms have a joint-defense agreement covering the three. Investigating tax implications of ABC’s acquisition and sale of closely held companies, the government issued a grand jury subpoena to ABC’s former vice president as custodian of records. The documents are in custody of Blank. ABC refused to accept service of the subpoena issued to its former employee. The government issued subpoenas to LaCheen and Blank. The firms withheld documents listed on a privilege log. The government sought to compel ABC, Blank, and LaCheen to produce documents identified on the privilege logs, citing cited the crime-fraud doctrine, which provides that evidentiary privileges may not be used to shield communications made for purposes of getting advice for commission of a fraud or crime. The district court entered the order. The Third Circuit dismissed for lack of appellate jurisdiction. To obtain immediate appellate review, a privilege holder must disobey the order, be held in contempt, then appeal the contempt order. That route is available to ABC, which can obtain custody of the documents from its agent. View "In Re: Grand Jury" on Justia Law

Between 2004 and 2008, Brown ran an elaborate scheme that tricked lenders into issuing fraudulent mortgage loans in Chicago and Las Vegas. Brown recruited or directed dozens of individuals: lawyers, accountants, loan officers, bank employees, realtors, home builders, and nominee buyers. Of his accomplices, 32 people were criminally charged. The Chicago scheme resulted in about 150 fraudulent loans, totaling more than $95 million in proceeds from victim lenders. The Las Vegas scheme resulted in approximately 33 fraudulent loans totaling about $16 million. Brown entered guilty pleas and was sentenced to 216 months’ imprisonment for the Las Vegas scheme and 240 months’ imprisonment for the Chicago scheme, to run concurrently. The district court also imposed a restitution amount of more than $32.2 million. The Seventh Circuit affirmed Brown’s sentence, rejecting a challenge to the loss calculation. The court remanded the 66-month sentence and $7.1 restitution order against another participant in the Chicago scheme because the court incorrectly determined the number of victims. View "United States v. Love" on Justia Law