Justia White Collar Crime Opinion Summaries

A licensed veterinarian developed and manufactured undetectable performance enhancing drugs (PEDs) for use in professional horse racing, selling them to trainers who administered them to horses to gain a competitive edge. His salesperson assisted in these activities, operating a company that distributed the drugs without prescriptions or FDA approval. The drugs were misbranded or adulterated, and the operation involved deceptive practices such as misleading labeling and falsified customs forms. The PEDs were credited by trainers for their horses’ successes, and evidence showed the drugs could be harmful if misused.The United States District Court for the Southern District of New York presided over two separate trials, resulting in convictions for both the veterinarian and his salesperson for conspiracy to manufacture and distribute misbranded or adulterated drugs with intent to defraud or mislead, in violation of the Food, Drug, and Cosmetic Act. The district court denied motions to dismiss the indictment, admitted evidence from a prior state investigation, and imposed sentences including imprisonment, restitution, and forfeiture. The court calculated loss for sentencing based on the veterinarian’s gains and ordered restitution to racetracks based on winnings by a coconspirator’s doped horses.On appeal, the United States Court of Appeals for the Second Circuit held that the statute’s “intent to defraud or mislead” element is not limited to particular categories of victims; it is sufficient if the intent relates to the underlying violation. The court found no error in the admission of evidence from the 2011 investigation or in the use of gain as a proxy for loss in sentencing. However, it vacated the restitution order to racetracks, finding no evidence they suffered pecuniary loss, and vacated the forfeiture order, holding that the relevant statute is not a civil forfeiture statute subject to criminal forfeiture procedures. The convictions and sentence were otherwise affirmed. View "United States v. Fishman" on Justia Law

Two former employees of a large technology company, along with a real estate developer and related individuals and entities, were alleged to have engaged in a kickback scheme involving real estate transactions in Northern Virginia. The employees, responsible for managing real estate deals for the company, allegedly steered contracts to the developer’s firm in exchange for secret payments funneled through a network of trusts and entities. The scheme purportedly inflated the company’s costs for both leasing and purchasing properties, with millions of dollars in kickbacks distributed among the participants. The company discovered the scheme after a whistleblower report, conducted an internal investigation, and reported the matter to federal authorities.The United States District Court for the Eastern District of Virginia granted summary judgment in favor of the defendants on several claims, including those under the Racketeer Influenced and Corrupt Organizations (RICO) Act, fraud, unjust enrichment, and conversion, and partially on a civil conspiracy claim. The district court found that the company failed to establish the existence of a RICO enterprise, did not show injury to its business or property, and that equitable claims were precluded by the availability of legal remedies or the existence of contracts. The court also ruled that an attorney defendant could not be liable for conspiracy with his clients.The United States Court of Appeals for the Fourth Circuit reversed the district court’s summary judgment. The appellate court held that genuine disputes of material fact existed regarding the existence of a RICO enterprise, whether the company suffered financial harm, and the viability of the fraud, unjust enrichment, conversion, and civil conspiracy claims. The court clarified that the company was entitled to pursue legal and equitable remedies in the alternative and that the attorney’s potential liability for conspiracy could not be resolved on summary judgment. The case was remanded for further proceedings. View "Amazon.com, Inc. v. WDC Holdings LLC" on Justia Law

A pharmaceutical company participated in a federal program that required it to report the average price it received for drugs sold to wholesalers, which in turn affected the rebates it owed the government under Medicaid. From 2005 to 2017, the company sold drugs to wholesalers at an initial price, but if it raised the price before the wholesaler resold the drugs to pharmacies, it required the wholesaler to pay the difference. The company reported only the initial price as the average manufacturer price (AMP), excluding the subsequent price increases, which resulted in lower reported AMPs and thus lower rebate payments to the government. The company justified this exclusion by categorizing the price increases as part of a bona fide service fee to wholesalers, even though the increased value was ultimately paid by pharmacies.The United States District Court for the Northern District of Illinois reviewed the case after a qui tam action was filed by a relator, who alleged that the company’s AMP calculations were false and violated the False Claims Act (FCA). The district court granted summary judgment to the relator on the issue of falsity, finding the AMP calculations and related certifications were factually and legally false. The issues of scienter (knowledge) and materiality were tried before a jury, which found in favor of the relator and awarded substantial damages. The company appealed, challenging the findings on falsity, scienter, and materiality, while the relator cross-appealed on the calculation of the number of FCA violations.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s judgment. The court held that the company’s exclusion of price increase values from AMP was unreasonable and contradicted the plain language and purpose of the relevant statutes, regulations, and agreements. The court also held that the jury reasonably found the company acted knowingly and that the false AMPs were material to the government’s payment decisions. The court rejected the cross-appeal on damages, finding the issue was not properly preserved for appeal. View "Streck v Eli Lilly and Company" on Justia Law

Ephren Taylor, II, formerly CEO of City Capital Corporation, was indicted in 2014 for orchestrating a fraudulent investment scheme that targeted African American and Christian communities. Taylor promoted investments and promissory notes, misrepresenting their returns and using new investor funds to pay business expenses, resulting in losses exceeding $16 million for over 400 victims. He pleaded guilty to conspiracy to commit wire and mail fraud and was sentenced to 235 months in prison, later reduced to 223 months, with restitution ordered.Taylor filed a pro se motion under 28 U.S.C. § 2255 in the United States District Court for the Northern District of Georgia, alleging ineffective assistance of counsel and various judicial errors. The District Court, after adopting a magistrate judge’s report and recommendation, denied the motion, finding Taylor’s claims either procedurally defaulted, waived, or unsupported by the record. Taylor’s subsequent Rule 59(e) and Rule 60(b) motions were also denied, and he filed multiple additional motions, including to amend or supplement his § 2255 petition and to modify conditions of supervised release. The District Court denied these later motions, determining they were unauthorized second or successive filings under 28 U.S.C. §§ 2244(b) and 2255(h), and that it lacked jurisdiction due to Taylor’s pending appeal.On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed the District Court’s denial of Taylor’s motions to reopen, supplement, and amend his original § 2255 motion, holding they were unauthorized second or successive filings barred by AEDPA’s gatekeeping provisions. The Eleventh Circuit also affirmed that Taylor’s challenges to the legality or constitutionality of his supervised release conditions could not be raised under 18 U.S.C. § 3583(e)(2). However, the court vacated the District Court’s denial of Taylor’s motion to modify conditions of supervised release and remanded for consideration of the relevant statutory factors. View "United States v. Taylor" on Justia Law

Lawrence Rudolph was convicted for the fatal shooting of his wife, Bianca Rudolph, during a 2016 hunting trip in Zambia. The couple, married for nearly thirty-five years, had substantial marital assets and maintained significant life insurance policies. Their marriage was troubled by infidelity, including Mr. Rudolph’s long-term affair with Lori Milliron, a partner at his dental practice. After Bianca’s death, which Mr. Rudolph claimed was accidental, he collected nearly $4.8 million in life insurance proceeds and purchased several high-value assets. Less than two weeks after returning to the United States, he arranged for Ms. Milliron to join him in Arizona, and they began living together.The Federal Bureau of Investigation in Denver initiated an investigation in 2019, reviewing the Zambian authorities’ findings and conducting its own forensic analysis. In December 2021, Mr. Rudolph was arrested in Denver after being deported from Mexico, and indicted by a grand jury in the United States District Court for the District of Colorado on charges of foreign murder and mail fraud. He moved to dismiss for improper venue and to sever his trial from Ms. Milliron’s, arguing that the government engaged in forum shopping and that a joint trial would prejudice his defense. The district court denied both motions, admitted certain statements by Bianca under the forfeiture-by-wrongdoing exception, and ordered forfeiture of assets purchased with the insurance proceeds.The United States Court of Appeals for the Tenth Circuit reviewed the case. It held that venue in Colorado was proper under 18 U.S.C. § 3238, as Mr. Rudolph was both “arrested” and “first brought” to the district in connection with the charges. The court found no abuse of discretion in denying severance, admitting Bianca’s statements under Rule 804(b)(6), or ordering forfeiture of the assets, including interest and appreciation. The Tenth Circuit affirmed the district court’s judgment and forfeiture order. View "United States v. Rudolph" on Justia Law

A group of former executives from an investment management company were prosecuted after the company collapsed and was placed in receivership. The company, which raised hundreds of millions of dollars from private investors, primarily through promissory notes and other investment vehicles, experienced severe financial distress following the default of a major asset. Despite this, the executives continued to solicit investments, representing to investors that their funds would be used to purchase secure receivables and that the company was financially healthy. In reality, most new investor funds were used to pay prior investors and cover operating expenses. The executives were accused of making material misrepresentations and misleading half-truths about the use of investor funds, the security of investments, and the company’s financial health.The United States District Court for the District of Oregon presided over the trial. The jury found all three defendants guilty of conspiracy to commit mail and wire fraud and multiple counts of wire fraud; one defendant was also convicted of making a false statement on a loan application. The defendants argued that they were improperly convicted on an omissions theory of fraud and that they were prevented from presenting a complete defense based on disclosures in offering documents and financial statements. They also challenged the sufficiency of the evidence and the materiality of their statements.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the government’s theory at trial was based on affirmative misrepresentations and misleading half-truths, not mere omissions, and that the jury instructions fairly stated the law. The court found that evidence of what was not disclosed was relevant to materiality, and that disclaimers in offering documents did not render other representations immaterial in a criminal fraud prosecution. The convictions were affirmed. View "USA V. JESENIK" on Justia Law

A U.K. citizen and former hedge fund manager predicted that the South African rand would strengthen against the U.S. dollar following a South African election. Acting on this belief, he purchased a one-touch barrier option for his hedge fund, which would pay $20 million if the rand-to-dollar exchange rate dropped below 12.50 before the option’s expiration. As the expiration approached and the rate hovered just above the threshold, he instructed a banker in Singapore to sell large amounts of dollars for rand to push the exchange rate below 12.50, thereby triggering the option and securing the payout for his fund. The trades were executed while he was in South Africa, and the payout obligations ultimately fell on U.S.-based financial institutions.A grand jury in the United States District Court for the Southern District of New York indicted him for commodities fraud and conspiracy to commit commodities fraud under the Commodity Exchange Act (CEA). At trial, the government presented evidence of his intent to manipulate the market to trigger the option. The jury convicted him of commodities fraud but acquitted him of conspiracy. The district court denied his post-trial motions for acquittal or a new trial, finding sufficient evidence of a direct and significant connection to U.S. commerce, adequate jury instructions, and no due process violation.On appeal, the United States Court of Appeals for the Second Circuit affirmed the conviction. The court held that the CEA’s extraterritoriality provision applied because the conduct had a direct and significant connection to U.S. commerce, given that U.S. financial institutions bore the payout risk. The court also found the jury instructions on intent and materiality were proper, that proof of an artificial price was not required under the charged anti-fraud provision, and that the defendant had fair notice his conduct was unlawful. The district court’s judgment was affirmed. View "United States v. Phillips" on Justia Law

Miguel Salinas-Salcedo pled guilty to conspiracy to commit money laundering, admitting that over a two-and-a-half-year period he helped Mexican drug cartels launder nearly $3 million through 24 transactions. His role was to connect cartel members with individuals in the United States who could deposit and transfer large sums of cash into bank accounts without attracting government attention. Salinas-Salcedo acted as the intermediary, relaying instructions, authenticating transactions, and confirming deposits, ultimately earning over $44,000 in commissions. Unbeknownst to him, some of his contacts were undercover law enforcement agents.The United States District Court for the Northern District of Illinois, Eastern Division, sentenced Salinas-Salcedo after applying a four-level enhancement under U.S.S.G. §2S1.1(b)(2)(C) for being “in the business of laundering funds.” Salinas-Salcedo argued that he was merely a “middleman” and not in the business of laundering funds as contemplated by the guidelines. The district court rejected this argument, finding his participation integral to the conspiracy and imposing a below-guidelines sentence of 96 months.On appeal, the United States Court of Appeals for the Seventh Circuit reviewed the district court’s interpretation of the Sentencing Guidelines de novo, as the facts were undisputed. The appellate court held that Salinas-Salcedo’s conduct fell squarely within the scope of the “business of laundering funds” enhancement, as defined by the guidelines and relevant statutes. The court found that his regular, multi-year involvement, substantial earnings, and discussions with undercover agents satisfied the enhancement’s factors. The Seventh Circuit also rejected Salinas-Salcedo’s claim of procedural error, concluding that the district court adequately addressed his objections. The judgment was affirmed. View "United States v. Salinas-Salcedo" on Justia Law

Randolph Jay Forrest worked at a used car dealership in Iowa from 2012 to 2021, where he and the owners engaged in a scheme to roll back odometers on dozens of vehicles, alter their titles, and resell them without disclosing the true mileage. After the scheme was discovered, Forrest was indicted on multiple counts, including odometer tampering, mail fraud, and wire fraud. He ultimately pled guilty to one count of wire fraud under a plea agreement, which required him to pay full restitution to all victims harmed by his conduct.The United States District Court for the Northern District of Iowa was tasked with determining the appropriate amount of restitution. Several methodologies were presented: Forrest’s expert suggested calculating loss based on average vehicle value using industry guides, resulting in a total loss of $38,070; the probation office recommended a 40% loss valuation, totaling $76,690; and the government proposed using either the total purchase price paid by victims or the estimated profit from the scheme. The government’s expert, Howard Nusbaum, calculated loss based on the diminished use value of the vehicles, considering the impact of branded titles and misrepresented mileage, arriving at a total loss of $140,178.56. The district court adopted Nusbaum’s methodology, finding it reasonable and supported by the evidence, and rejected Forrest’s arguments regarding salvage value and the reliability of purchase prices.On appeal, Forrest challenged the district court’s adoption of Nusbaum’s methodology, arguing it was insufficiently individualized and did not account for the actual value retained by purchasers. The United States Court of Appeals for the Eighth Circuit reviewed the restitution award for abuse of discretion and clear error. The court held that the district court did not abuse its discretion or clearly err in its loss estimation, given the complexity of the scheme and the evidence presented. The judgment of the district court was affirmed. View "United States v. Forrest" on Justia Law

Five individuals were charged in federal court for their roles in a large-scale drug trafficking operation. The scheme involved purchasing marijuana from states where it was legal, such as California and Oregon, and distributing it to twenty-one other states. The operation used drivers to transport marijuana and related products, with cash proceeds handled outside of financial institutions to avoid detection. Law enforcement investigations included surveillance, traffic stops, and searches of residences, warehouses, and storage units, resulting in the seizure of large quantities of marijuana, THC products, cash, and firearms. The lead investigator analyzed cell phone data to estimate the scope of the conspiracy, concluding it involved over 23,000 kilograms of marijuana.The United States District Court for the Eastern District of Texas indicted the five appellants and ten co-defendants on multiple counts, including conspiracy to possess with intent to distribute marijuana, conspiracy to commit money laundering, and other individualized charges. Eight co-defendants pleaded guilty, while the five appellants went to trial. After an eight-day trial, the jury convicted all five of conspiracy to possess with intent to distribute 1,000 kg or more of marijuana and conspiracy to commit money laundering. Roberts was also convicted of continuing criminal enterprise and possession of a firearm in furtherance of a drug trafficking crime. Sentences ranged from 48 to 240 months’ imprisonment, with some counts dismissed or sentences ordered to run concurrently.The United States Court of Appeals for the Fifth Circuit reviewed the convictions and sentences. The court affirmed the convictions for conspiracy to possess with intent to distribute marijuana and promotional money laundering, but vacated the sentences for certain defendants due to errors in the admission of a summary chart used to estimate drug quantities and clerical errors in the judgments and presentence reports. The court remanded for resentencing under the default penalty provision and correction of clerical errors, while affirming other aspects of the convictions and venue determinations. View "United States v. McGuire" on Justia Law