Justia White Collar Crime Opinion Summaries

The First Circuit affirmed the judgment of the district court convicting Defendants of mail fraud and violations of section one of the Sherman Act, holding that Defendants were not entitled to reversal of their convictions or a reduction in the restitution amounts Defendant were ordered to pay.Defendants were school bus operators who contracted with the Caguas, Puerto Rico municipal school system. In 2013, Defendants banded together with four other school bus operators in a bid-rigging and market-allocation conspiracy, thereby protecting themselves from the price-reducing effects of fair competition. After they were convicted they appealed, claiming, among other things, an absence of intestate nexus and insufficiency of the evidence. The First Circuit affirmed, holding (1) the bid rigging in this case was well within the reach of the Sherman Act; (2) there was no variance from or constructive amendment to the indictment; (3) the district court acted within its discretion in excluding evidence at trial about whether Defendants' conduct really cost Caguas money; (4) the district court did not err in setting the restitution amounts; and (5) Defendants were not entitled to relief on their remaining allegations of error. View "United States v. Vega-Martinez" on Justia Law

Fishoff began trading securities in the 1990s. By 2009, he had earned enough money to establish his own firm, with one full-time employee and several independent contractors. Fishoff had no formal training in securities markets, regulations, or compliance. Nor did he hold any professional license. He operated without expert advice. Fishoff engaged in short-selling stock in anticipation of the issuer making a secondary offering. Secondary offerings are confidential but a company, through its underwriter, may contact potential buyers to assess interest. When a salesperson provides confidential information, such as the issuer's name, the recipient is barred by SEC Rule 10b-5-2, from trading the issuer’s securities or disclosing the information before the offering is publicly announced. Fishoff’s associates opened accounts at investment banking firms in order to receive solicitations to invest in secondary offerings. They agreed to keep the information confidential but shared it with Fishoff, who would short-sell the company’s shares.Fishoff pled guilty to securities fraud (15 U.S.C. 78j(b), 78ff; 17 C.F.R. 240.10b-5 (Rule 10b-5); 18 U.S.C. 2), stipulating that he and his associates made $1.5 to $3.5 million by short-selling Synergy stock based on confidential information. Fishoff unsuccessfully claimed that he had no knowledge of Rule 10b5-2 and was entitled to the affirmative defense against imprisonment under Securities Exchange Act Section 32, as a person who violated a Rule having “no knowledge of such rule or regulation”. The Third Circuit affirmed his 30-month sentence. Fishoff adequately presented his defense. The court’s ruling was sufficient; the government never agreed that the non-imprisonment defense applied. Fishoff did not establish a lack of knowledge. His attempts to conceal his scheme suggests that he was aware that it was wrong. View "United States v. Fishoff" on Justia Law

This case arose out of a fraudulent business scheme involving the sale of the “Scrubbieglove” cleaning product. Defendant Pasquale Rubbo and other co-conspirators lied to investors to solicit money, ultimately defrauding them of more than six million dollars. The conspirators lured potential investors to the “Scrubbieglove” by lying about high returns on investment, potential and ongoing business deals, and how they would use and invest funds. They also misrepresented the Scrubbieglove’s production demand, telling told investors that the Scrubbieglove required substantial financing because of deals with QVC, Wal-Mart, Walgreens, and other major retailers. In reality, beyond producing a few samples, the conspirators never manufactured any Scrubbiegloves. Instead, the conspirators transferred investor funds to their own personal bank accounts. Defendant’s primary role in the scheme involved intimidating and threatening investors to ensure their silence. Defendant pleaded guilty to two fraud-related charges, and was sentenced to 106 months’ imprisonment. He appealed his sentence, alleging the government breached the Plea Agreement. Finding no breach, the Tenth Circuit affirmed Defendant’s sentence. View "United States v. Rubbo" on Justia Law

During the 2009-2010 term, James was a senator in the Virgin Islands Legislature. The Legislature maintained a fund for Legislature-related expenses. James used a large portion of the checks issued to him by the fund for personal expenses and his re-election campaign. James obtained these checks by presenting invoices purportedly associated with work on a historical project. In 2015, James was charged with two counts of wire fraud, 18 U.S.C. 1343 and one count of federal program embezzlement, 18 U.S.C. 666(a)(1)(A). The Third Circuit affirmed his convictions, upholding a ruling that allowed the prosecution to introduce evidence of acts outside the limitations period, 18 U.S.C. 3282(a), and the substitution of an excused juror with an alternate after the jury had been polled. The court rejected a claim of prosecutorial misconduct based on the prosecution calling two witnesses concerning an eviction dispute. The court had instructed the government not to discuss the eviction case in its opening; neither witness testified about the eviction case. The Third Circuit also upheld a ruling that permitted the use of a chart as a demonstrative aid to accompany the case agent’s testimony, with an instruction that the jury that it should consider the chart as a guide for testimony, not as substantive evidence. View "United States v. James" on Justia Law

Defendant, the former Speaker of the New York State Assembly, was convicted of two counts each of honest services mail fraud, honest services wire fraud, and Hobbs Act extortion, and one count of money laundering.The Second Circuit held that extortion under color of right and honest services fraud require that the official reasonably believe, at the time the promise is made, that the payment is made in return for a commitment to perform some official action. However, neither crime requires that the official and payor share a common criminal intent or purpose. The court also held that both offenses require that the official understand—at the time he accepted the payment—the particular question or matter to be influenced.In this case, the district court's instructions failed to convey this limitation on the "as the opportunities arise" theory, and the error was not harmless with respect to defendant's convictions under three counts. Furthermore, the evidence as to the same three counts was insufficient as a matter of law to sustain a guilty verdict, and thus the court remanded with directions to dismiss the indictment with prejudice as to them. The court found the error was harmless as to Counts 3s, 4s, and 6s, and affirmed defendant's conviction on those counts. Finally, the court affirmed defendant's conviction under Count 7s for money laundering, because that crime does not require the defendant to be convicted of the underlying criminal offenses, nor does it require the underlying offense to take place within the limitations period. View "United States v. Silver" on Justia Law

The Fifth Circuit affirmed defendant's convictions on twenty-three felony counts related to his role in schemes to defraud philanthropists, using their money to finance his personal life and political career. Defendant served two nonconsecutive terms in the United States House of Representatives.The court held that the district court's jury instructions were not erroneous; it was not plain error for the district court to define 501(c)(3) and 501(c)(4) organizations in the charge, and defendant was not entitled to an instruction on good faith; the district court did not err by denying defendant's motions for judgment of acquittal under Rule 29; the government provided ample evidence that defendant fraudulently devised, and implemented, a scheme to deprive two donors of their money and property, thus allowing the jury to rationally find him guilty of mail fraud, wire fraud, and money laundering; and the Federal Election Campaign Act's contribution limits apply to coordinated spending on political communications, irrespective of whether those communications contain magic words of express advocacy. View "United States v. Stockman" on Justia Law

The Second Circuit affirmed defendant's convictions for wire fraud, Title 18 securities fraud, conversion of U.S. property, and conspiracy, arising from the misappropriation of confidential information from the Centers for Medicare & Medicaid Services. The federal wire fraud, securities fraud, and conversion statutes, are codified at 18 U.S.C. 1343, 1348, and 641, respectively.The court held that confidential government information may constitute "property" for purposes of the wire fraud and Title 18 securities fraud statutes. The court also held that the "personal-benefit" test announced in Dirks v. SEC, 463 U.S. 646 (1983), does not apply to those Title 18 fraud statutes. Finally, the panel found no prejudicial error with respect to the remaining issues presented on appeal. View "United States v. Blaszczak" on Justia Law

The Drug Enforcement Administration investigated Dr. Ley and his opioid addiction treatment company, DORN, conducted undercover surveillance, and decided Ley did not have a legitimate medical purpose in prescribing Suboxone. Indiana courts issued warrants, culminating in arrests of four physicians and one nurse and seven non-provider DORN employees. Indiana courts dismissed the charges against the non-providers and the nurse. Ley was acquitted; the state dismissed the charges against the remaining providers. DORN’s providers and non-provider employees sued, alleging false arrest, malicious prosecution, and civil conspiracy. The district court entered summary judgment for the defendants, holding probable cause supported the warrants at issue. The Seventh Circuit affirmed as to every plaintiff except Mackey, a part-time parking lot attendant. One of Ley’s former patients died and that individual’s family expressed concerns about Ley; other doctors voiced concerns, accusing Ley of prescribing Suboxone for pain to avoid the 100-patient limit and bring in more revenue. At least one pharmacy refused to fill DORN prescriptions. Former patients reported that they received their prescriptions without undergoing any physical exam. DORN physicians prescribed an unusually high amount of Suboxone; two expert doctors opined that the DORN physicians were not prescribing Suboxone for a legitimate medical purpose. There was evidence that the non-provider employees knew of DORN’s use of pre-signed prescriptions and sometimes distributed them. There were, however, no facts alleged in the affidavit that Mackey was ever armed, impeded investigations, handled money, or possessed narcotics. View "Vierk v. Whisenand" on Justia Law

Health benefit plans sued GSK, the manufacturer of the prescription drug Avandia, under state consumer-protection laws and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. ch. 96 (RICO), based on GSK’s marketing of Avandia as having benefits to justify its price, which was higher than the price of other drugs used to treat type-2 diabetes. The district court granted GSK summary judgment, finding that the state-law consumer-protection claims were preempted by the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. ch. 9; the Plans had failed to identify a sufficient “enterprise” for purposes of RICO; and the Plans’ arguments related to GSK’s alleged attempts to market Avandia as providing cardiovascular “benefits” were “belated.” The Third Circuit reversed, applying the Supreme Court’s 2019 "Merck" decision. The state-law consumer-protection claims are not preempted by the FDCA. The Plans should have been given the opportunity to seek discovery before summary judgment on the RICO claims. Further, from the inception of this litigation, the Plans’ claims have centered on GSK’s marketing of Avandia as providing cardiovascular benefits as compared to other forms of treatment, so the district court’s refusal to consider the Plans’ “benefits” arguments was in error because those arguments were timely raised. View "In re: Avandia Marketing, Sales and Products Liability Litigation" on Justia Law

Kenneth Brewington told potential investors that he owned or controlled billions in assets that didn’t exist. At trial, Brewington acknowledged that much of what he had said was untrue. But he argued to the jury that he had been duped. "The jury was apparently unimpressed," and found him guilty on eleven counts of: (1) conspiracy to commit mail and wire fraud; (2) mail fraud; (3) wire fraud; (4) conspiracy to commit money laundering; (5) money laundering; and (6) monetary transactions in property derived from specified unlawful activity. Brewington was sentenced to 70 months in prison. Brewington appealed the convictions based on the district court’s: (1) exclusion of emails that he had sent and received and (2) restriction of testimony by another person duped by the same man who had allegedly duped Brewington. The Tenth Circuit rejected these challenges, finding Brewington never offered some of the emails into evidence, so the court never had an opportunity to consider their admissibility. The district court did exclude three other emails. But if the court did err in these rulings, the errors would have been harmless because the district court ultimately allowed Brewington to testify about the emails, and the evidence of his guilt was overwhelming. View "United States v. Brewington" on Justia Law