Justia White Collar Crime Opinion Summaries

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Before acquiring cars for resale, Elite obtained financing; its lenders held the title of each car until it received payment for the car. Lenders dispatched auditors to ensure the dealership was not selling cars without repaying the loan after each sale. From 2012-2015 Elite’s employees obtained copies of car titles from the Indiana Bureau of Motor Vehicles online portal. If a copy could not be acquired, employees could avoid asking lenders to release car titles by continually issuing the customer temporary license plates. Employees would call customers and request that their cars be returned to the lot for a free oil change before an auditor’s inspection or would lie to the auditor, saying that the car was out for a test drive or repairs. Elite’s employees also defrauded consumer lenders by helping customers submit fraudulent applications and defrauded insurance companies by using a chop shop behind the dealership to disassemble their own vehicles before reporting the vehicles as stolen. Elite employee Dridi was convicted of conspiring to violate the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(d), and interstate transportation of stolen property, 18 U.S.C. 2314, sentenced to 72 months in prison, and ordered $1,811,679.25 in restitution. The Seventh Circuit affirmed Dridi’s prison sentence but vacated the restitution order, The district court should have made specific factual findings about Dridi’s participation in the conspiracy. View "United States v. Dridi" on Justia Law

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Bowling worked for the City of Gary, Indiana for 25 years, eventually becoming a network administrator, with access to the email system. Her responsibilities included ordering the city's computer equipment. Bowling ordered 1,517 Apple products, totaling $1,337,114.06. She sold iPads and MacBooks for cash. To conceal her scheme, Bowling submitted duplicate invoices from legitimate purchases. Eventually, the fraudulent purchases outstripped the duplicate invoices she could process and one vendor, CDW, turned the city’s account over to a senior recovery analyst, Krug. Krug contacted Green, the city’s controller and sent Green invoices via FedEx. Bowling intercepted the package, accessed Green’s email account, and sent a fabricated message to Krug to reassure CDW but her scheme unraveled. The Seventh Circuit affirmed her conviction for theft from a local government that received federal funds, 18 U.S.C. 666, and her 63-month sentence. The federal funds element was satisfied; the parties stipulated that Gary as a whole received more than $10,000 in federal benefits in a one-year period. Krug’s testimony about the email was direct evidence of Bowling’s attempt to stall the city’s ultimate discovery of her fraud; there was no error in admitting the testimony under Rule 404(b). A two-level obstruction of justice sentencing enhancement was justified because Bowling faked mutism, causing a one-year delay in the proceedings. View "United States v. Bowling" on Justia Law

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Holland, a songwriter, sold his song-rights to music companies, in exchange for royalty payments. Holland failed fully to report his income. In 1986-1990, the IRS levied Holland’s royalty assets and recovered $1.5 million. In 1997, the IRS informed him that it intended again to levy those assets. Holland converted his interest in future royalty payments into a lump sum and created a partnership wholly owned by him, to which he transferred title to the royalty assets ($23.3 million). The partnership borrowed $15 million, for which the royalty assets served as collateral. Bankers Trust paid $8.4 million directly to Holland, $5 million in fees, and $1.7 million for Holland’s debts, including his taxes. The IRS did not assess any additional amounts against Holland until 2003. In 2005, the partnership refinanced the 1998 deal, using Royal Bank. In 2012, the IRS concluded that the partnership held the royalty assets as Holland’s alter ego or fraudulent transferee and recorded a $20 million lien against the partnership. In an enforcement suit, the partnership sold the royalty assets. The proceeds ($21 million) went into an interpleader fund, to be distributed to the partnership’s creditors in order of priority. The government’s lien ($20 million), if valid against the partnership, would take priority over Royal Bank’s security interest. The Sixth Circuit affirmed a judgment for Royal Bank. Transactions to monetize future revenue, using a partnership or corporate form, are common and facially legitimate. Holland received adequate consideration in 1998. The IRS’s delay in making additional assessments rather than the 1998 transfer caused the government’s collection difficulties. View "United States v. Holland" on Justia Law

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Hernandez co-founded the Trust and marketed it as a company designed to assist homeowners struggling to pay their mortgages. She and her codefendants promised prospective “members” that, in exchange for fees of $3,500-$10,000, the Trust would negotiate with their lenders to take over their mortgages and stop or prevent foreclosure proceedings. The Trust promised to refund the fees if it could not purchase the mortgages. More than 50 homeowners became members and paid fees. In 2013, Illinois authorities discovered that the Trust was not licensed and did not have enough funds to purchase a single mortgage. Hernandez and her codefendants had spent the fees (more than $220,000) on meals, travel, and vehicles. The Trust did not help any homeowners; at least three homeowners who paid the Trust had their homes foreclosed on. A jury found Hernandez guilty of mail fraud. The Seventh Circuit affirmed, rejecting arguments that the government did not prove that she used the mails in furtherance of the scheme to defraud and that the district court improperly delegated its authority to the Bureau of Prisons by not entering a specific restitution payment schedule for her while serving her prison sentence. There was sufficient evidence to support the verdict and the court permissibly deferred Hernandez’s restitution payments until after her release. View "United States v. Hernandez" on Justia Law

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Simon, a CPA, was convicted of filing false tax returns, mail fraud related to financial aid, and federal financial aid fraud. The court imposed a prison term, and restitution of $886,901.69 to the IRS, $48,070.35 to the Department of Education, $17,000 to Canterbury School, and $101,600 to Culver Academies. Simon made no objections to the restitution. The Seventh Circuit affirmed Simon’s convictions. Simon had not challenged his restitution obligations. Simon later unsuccessfully moved to vacate his conviction, alleging ineffective assistance of counsel, but not with respect to restitution. At the government's request, the court removed Canterbury as a payee, directing Simon’s restitution payments to Culver (private victims receive restitution ahead of the government, 18 U.S.C. 3664(i)) and approved an updated balance of $48,376, without a hearing. Days later, Simon received notice of the order. Seven months later, Simon moved for reconsideration, arguing that he had a due process right to be heard on the government’s motion and that the amended balance constituted a new obligation. The schools had disclaimed any interest in restitution. Simon urged the court to eliminate his restitution and requested that the court strike all restitution to the Department of Education, claiming that his daughter had paid off her student loans so the Department was no longer at risk. The Seventh Circuit affirmed. Most of Simon’s challenges could and should have been raised at sentencing and on direct appeal and were waived; the remainder were untimely. View "United States v. Simon" on Justia Law

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The Fifth Circuit affirmed defendant's conviction and sentence for conspiracy to defraud the United States, conspiracy to commit wire fraud, and three substantive counts of wire fraud, relating to the operation of his company, Gourmet Express. The court held that the IRS agents' search of defendant's home office did not violate the Fourth Amendment and therefore the district court did not err by admitting the seized evidence. In this case, the good faith exception to the exclusionary rule applied. The court rejected defendant's argument that the government violated due process by filing the second superseding indictment and held that the district court did not err in refusing to strike it. The court weighed the four Barker factors and held that plaintiff's Sixth Amendment right to a speedy trial was not violated. Finally, the court held that there was sufficient evidence to support defendant's convictions for wire fraud and conspiracy to commit wire fraud, and defendant's sentence was substantively reasonable. View "United States v. Scully" on Justia Law

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The Fifth Circuit affirmed defendants' convictions for conspiracy and fraud for participating in a plot to defraud the federal workers’ compensation fund. The court held that the evidence was sufficient to convict Defendants Rose and Sanders of conspiracy to commit health care and wire fraud, as well as health care fraud and aiding and abetting. Furthermore, the evidence was sufficient to convict Rose of conspiracy to launder money, and of money laundering and aiding and abetting. The court also held that the district court did not plainly err by denying a motion for a mistrial, and there was no error in the district court's handling of a recalcitrant witness. Finally, the court upheld the criminal forfeiture order. View "United States v. Sanders" on Justia Law

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A district court dismissed Plaintiff–Appellant Lawrence Smallen and Laura Smallen Revocable Living Trust’s securities-fraud class action against Defendant–Appellee The Western Union Company and several of its current and former executive officers (collectively, “Defendants”). Following the announcements of Western Union’s settlements with regulators in January 2017 and the subsequent drop in the price of the company’s stock shares, Plaintiff filed this lawsuit on behalf of itself and other similarly situated shareholders. In its complaint, Plaintiff alleged Defendants committed securities fraud by making false or materially misleading public statements between February 24, 2012, and May 2, 2017 regarding, among other things, Western Union’s compliance with anti-money laundering and anti-fraud laws. The district court dismissed the complaint because Plaintiff failed to adequately plead scienter under the heightened standard imposed by the Private Securities Litigation Reform Act of 1995 (“PSLRA”). While the Tenth Circuit found the complaint may have given rise to some plausible inference of culpability on Defendants' part, the Court concurred Plaintiff failed to plead particularized facts giving rise to the strong inference of scienter required to state a claim under the PSLRA, thus affirming dismissal. View "Smallen Revocable Living Trust v. Western Union Company" on Justia Law

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Four men from Miami drove to Louisville to set up chiropractic clinics. Lezcano, the mastermind, decided to file false claims with the patients’ insurers and get paid for treatments that never happened. The others, Chavez, Betancourt, and Diaz joined in. The plan worked due to aggressive marketing. The conspirators recruited and paid patients both to come to the clinics and to recruit others. Many of the patients worked at the Jeffboat shipyard. Jeffboat (through its claim administrator, United Healthcare) paid the clinics more than $1 million for fake injections of a muscle relaxant. The government discovered the scheme and brought criminal charges. Chavez went to trial, claiming he had no idea that Lezcano was cooking the books. Convicted of healthcare fraud, conspiracy to commit healthcare fraud, aggravated identity theft, and conspiracy to commit money laundering for purposes of concealment. Chavez was sentenced to 74 months’ imprisonment. The Sixth Circuit affirmed, rejecting his challenges to the sufficiency of the evidence and a related challenge to the prosecutor’s closing argument; two hearsay arguments; three objections to the jury instructions; and a sentencing argument. View "United States v. Chavez" on Justia Law

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Grayson does business under the name Gire Roofing. Grayson and Edwin Gire were indicted for visa fraud, 18 U.S.C. 1546 and harboring and employing unauthorized aliens, 8 U.S.C. 1324(a)(1)(A)(iii). On paper, Gire had no relationship to Grayson as a corporate entity. He was not a stockholder, officer, or an employee. He managed the roofing (Grayson’s sole business), as he had under the Gire Roofing name for more than 20 years. The corporate papers identified Grayson’s president and sole stockholder as Young, Gire’s girlfriend. Gire, his attorney, and the government all represented to the district court that Gire was Grayson’s president. The court permitted Gire to plead guilty on his and Grayson’s behalf. Joint counsel represented both defendants during a trial that resulted in their convictions and a finding that Grayson’s headquarters was forfeitable. Despite obtaining separate counsel before sentencing, neither Grayson nor Young ever complained about Gire’s or prior counsel’s representations. Neither did Grayson object to the indictment, the plea colloquy, or the finding that Grayson had used its headquarters for harboring unauthorized aliens. The Seventh Circuit affirmed. Although Grayson identified numerous potential errors in the proceedings none are cause for reversal. Grayson has not shown that it was deprived of any right to effective assistance of counsel that it may have had and has not demonstrated that the court plainly erred in accepting the guilty plea. The evidence is sufficient to hold Grayson vicariously liable for Gire’s crimes. View "United States v. Grayson Enterprises, Inc." on Justia Law