Justia White Collar Crime Opinion Summaries

This case arose from the infamous Ponzi scheme perpetrated by Bernard Madoff. Between October and December 2008, Plaintiff MLSMK Investment Company invested $12.8 million with Madoff's investment company. Defendants JP Morgan Chase & Co. (JPMC) and JP Morgan Chase Bank (Chase) were trading partners in Madoff's legitimate market-making business and the bank with which Madoff maintained his accounts. MLSMK lost its money when Madoff was arrested and his assets seized. MLSMK subsequently filed suit, alleging that Defendants had conspired with Madoff to "fleece" his victims in violation of federal racketeering laws. Furthermore, MLSMK alleged that Defendants knew of Madoff's fraudulent scheme, and "eagerly" continued to receive the substantial fees derived from Madoff's market-making and banking activities. The district court dismissed MLSMK's petition in its entirety, concluding that the complaint did not adequately plead any of the claims purportedly contained therein. The Second Circuit previously upheld the district court's decision to dismiss MLSMK's petition on its state-law claims, but the federal racketeering issue was one of first impression for the Court. Upon review of the submitted briefs and the applicable legal authority, the Court concluded that the racketeering claim must also be dismissed because it was barred by a section of the Private Securities Litigation Reform Act (PSLRA). Accordingly, the court affirmed that portion of the district court's judgment pertaining to federal law.

Defendant Afuhia Masiu Manatau was in the business of stealing identities. Defendant stole social security numbers, credit cards and checks for which he would eventually be charged with and indicted for bank fraud and aggravated identity theft. This case turns on the question of an appropriate sentence. Seeking to calculate the applicable advisory guidelines sentence, the district court had to "identify the greater figure [of the actual or intended loss], and then proceed to one of the guidelines' inevitable charts." The question before the Tenth Circuit in this case is "what counts as an 'intended' loss? Unsurprisingly, [the Tenth Circuit] held that the term means exactly what it says: to be included in an advisory guidelines calculation the intended loss must have been an object of the defendant's purpose." Defendant argued that the government's "intended loss" analysis rested on a legal error. The Court remanded the case to the district court to properly determine Defendant's intended loss compared with the actual loss he caused, and to use the greater of the two to calculate Defendant's applicable sentencing enhancement.

Defendant, once a practicing psychiatrist, defrauded Medicare by receiving funds he was not entitled to receive and then fled the country to live as a fugitive in the Philippines. There, defendant created the website www.liver4you.org, fraudulently promising to provide critically ill patients liver or kidney transplants for certain sums of money. Defendant was subsequently convicted of one count of health care fraud and five counts of wire fraud. Defendant appealed, arguing that the district court committed four procedural errors in calculating defendant's offense level and imposed a substantively unreasonable sentence. The government argued that the court should not consider the four procedural errors because at sentencing the district court stated it would impose "the same sentence" even without some of the alleged errors. The court rejected this contention and emphasized that such predictions were only rarely appropriate. Defendant argued that his website was not mass-marketing pursuant to U.S.S.G. 2B1.1(b)(2)(A)(ii) because he did not initiate contact with his victims where they found his website, which was publicly available online, and emailed him at an address listed on the website. The court rejected defendant's distinction and held that he committed fraud by using the internet to solicit a large number of persons to buy his organ transplant services. Therefore, the court held that the enhancement applied even if defendant did not use the most active marketing method possible. Accordingly, the court affirmed the judgment of the district court.

This criminal appeal arose from a "finite reinsurance" transaction between American International Group, Inc. (AIG) and General Reinsurance Corporation (Gen Re). Defendants, four executives of Gen Re and one of AIG, appealed from judgments convicting them of conspiracy, mail fraud, securities fraud, and making false statements to the Securities and Exchange Commission. Defendants appealed on a variety of grounds, some in common and others specific to each defendant, ranging from evidentiary challenges to serious allegations of widespread prosecutorial misconduct. Most of the arguments were without merit, but defendants' convictions must be vacated because the district court abused its discretion by admitting the stock-price data and issued a jury instruction that directed the verdict on causation.

Plaintiff, a plastics manufacturer, dealt with a container company that filed for bankruptcy in 2002, filed a creditor's claim for more than $7 million, and objected to the sale of assets and lien priorities. The debtor had pledged all of its assets as security for a line of credit with ANB, its primary lender. Plaintiff claimed that there was a fraudulent scheme under which the debtor would produce containers and not pay for them, so that that they would be part of inventory when a successor company, let by insiders, purchased the assets in bankruptcy. After its claims were rejected in the bankruptcy proceedings, plaintiff sued ANB and Gateway alleging violation of RICO (18 U.S.C. 1961) and common-law fraud. The district court dismissed as "res judicata" but denied Rule 11 sanctions. The Seventh Circuit affirmed the dismissal, citing collateral estoppel, issue preclusion. The court did not find that the claims were frivolous or designed to harass.

In 2009, Appellant Shawn Merriman approached an "otherwise unsuspecting US Attorney's Office" and disclosed that he had engaged in a long-running Ponzi scheme that defrauded investors of over $20 million. At the time of his disclosure, Appellant had offered several million dollars' worth of assets to the government so that it could liquidate them and eventually remit the proceeds to Appellant's victims. Appellant cooperated with authorities throughout the proceedings and ultimately pled guilty to one could each of mail fraud and forfeiture. Appellant appealed two of the district court's sentencing decisions, arguing: (1) the district court should have counted the assets Appellant initially turned over as a 'credit' against his victims' measured aggregate loss; and (2) the court erred by finding he occupied a 'position of trust' for a two-point enhancement. Because Appellant did not challenge the substantive reasonableness of the district court's sentence, the Tenth Circuit reviewed the case on appeal for procedural reasonableness. Finding no clear error in the district court's sentence calculation, the Tenth Circuit affirmed the lower court's sentence.

Defendant was convicted of six counts of bank fraud and sentenced to 80 months imprisonment where defendant recruited other individuals to cash counterfeit checks. At issue was whether the district court erred by applying a two-level increase for possession or use of any device-making equipment or the production of trafficking of any unauthorized access device or counterfeit device under U.S.S.G. 2B1.1(b)(1) and a three-level increase for his aggravating role as a manager or supervisor under U.S.S.G. 3B1.1(b). The government conceded that the district court erred in applying the section 2B1.1(b)(1) enhancement where the enhancement could not be applied to offenses that involved a transfer originated solely by paper instrument. Therefore, the court held that the district court erred in applying the section 2B1.1(b)(1) enhancement. The court held, however, that the district court properly applied the aggravating role enhancement under section 3B1.1(b) where the recruited individuals knew or were willfully blind to the fraud. Accordingly, the court affirmed in part and reversed in part, remanding for resentencing.

Defendant pled guilty to one count of identity theft as part of a plea agreement where defendant had treated hundreds of patients while falsely representing that he was a licensed physician. In determining defendant's sentence, the district court increased his sentence under U.S.S.G. 3A1.1(b)(1) because some of his patients were children with serious mental health conditions. On appeal, defendant disputed the increase in his offense level, contending that section 3A1.1(b)(1)'s 2-level adjustment for vulnerable victims applied only to victims of defendant's offense of conviction, who in this case would include only those victims who suffered financial loss. The court disagreed and held that the adjustment applied not only to victims of the offense of conviction, but also to victims of defendant's relevant conduct. Accordingly, the court affirmed the judgment of the district court.

Defendant was convicted of failing to account for and pay employment taxes under 26 U.S.C. 7202, sentenced to 48 months imprisonment and fined $75,000. Defendant appealed his conviction, the calculation of loss to the government, and his fine. The court held that the district court did not err under Federal Rule of Evidence 404(b) in admitting evidence relating to defendant's compliance with Minnesota tax law. The court held however, that the district court made insufficient findings to conclude that defendant had violated section 7206(2). Accordingly, the court vacated the calculation of loss and remanded for resentencing on the existing record. Because the court remanded for resentencing, it did not reach defendant's remaining arguments.

Defendant, pro se, was convicted of 129 counts of unlawfully dispensing certain controlled substances by means of written prescriptions and sentenced to concurrent terms of imprisonment totaling 97 months and fined $200,000. At issue was whether the district court effectively denied defendant his right to testify. The court held that in these circumstances, where the district court initiated a colloquy with defendant regarding his right to testify, the district court was duty-bound to correct a pro se defendant's obvious misunderstanding of his right to testify. The court also held that the error was not harmless and therefore, the court vacated defendant's convictions and remanded.