Articles Posted in White Collar Crime

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Blue gem coal burns hotter and cleaner than thermal coal, making it useful for producing silicon, a critical ingredient of computer chips and solar panels. Environmental regulations make it difficult to mine. Demand for blue gem coal outstrips its supply; it commands premium prices. New Century advertised itself as one of the largest blue gem coal companies in the country, falsely claiming to own land with valuable deposits and to have mining permits. By the time law enforcement caught on, the company had swindled more than $14 million from more than 160 investors. Eleven people involved in the scheme, including the mastermind, Rose, pleaded guilty. Phillips, who worked for New Century scouting property, went to trial. Phillips helped Rose, a NASCAR driver with little experience in the coal industry, identify land with coal-mining potential. The evidence portrayed Phillips as a coal-industry expert who helped New Century convince investors that it was legitimate. Phillips claimed he had no idea that the company defrauded investors. The jury convicted Phillips of conspiracy to commit mail and wire fraud but acquitted him of two money-laundering charges. The judge sentenced him to 30 months in prison. The Sixth Circuit affirmed, rejecting challenges to the sufficiency of the evidence and to evidentiary rulings. View "United States v. Phillips" on Justia Law

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In 2008, Arise, a Dayton community school (charter school), faced declining enrollment, financial troubles, and scandal after its treasurer was indicted for embezzlement. The school’s sponsor sought a radical change in administration, elevated Arise’s former principal, Floyd, to superintendent, removed all board members, and appointed Floyd’s recommended candidates to the new board. Floyd set up a kickback scheme, using former business partners to form Global Educational Consultants, which contracted with Arise. Global received $420,919 from Arise. While Global was being paid, Arise teachers’ salaries were cut and staff members were not consistently paid. Arise ran out of money and closed in 2010. The FBI investigated and signed a proffer agreement with Ward, the “silent partner” at Global, then indicted Floyd, Arise board members, and Global's owner. They were convicted of federal programs bribery, conspiracy to commit federal programs bribery, and making material false statements, 18 U.S.C. 666(a)(1)(B), (a)(2); 18 U.S.C. 371; 18 U.S.C. 1001(a)(2). Two African-American jurors reported that they were initially unconvinced; the jury foreperson, a white woman, reportedly told them that she believed they were reluctant to convict because they felt they “owed something” to their “black brothers.” This remark prompted a confrontation, requiring the marshal to intervene.The Sixth Circuit affirmed their convictions, rejecting arguments based on the Supreme Court’s 2017 decision, Pena-Rodriguez v. Colorado. Although Pena-Rodriguez permitted, in very limited circumstances, an inquiry into a jury’s deliberations, this case did not fit into those limited circumstances. View "United States v. Robinson" on Justia Law

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The government sought forfeiture (21 U.S.C. 881(a)(4),(6), (7); 18 U.S.C. 981) of bank accounts, real properties, vehicles, and $91,500 in U.S. currency, related to its investigation into Salouha and Sbeih. Salouha allegedly illegally sold prescription drugs through his Ohio pharmacies, 21 U.S.C. 841. Salouha and Sbeih allegedly laundered the receipts through their accounts, 18 U.S.C. 1956. Sbeih and his wife filed verified claims to seven of the personal bank accounts. Sbeih was indicted but failed to appear. The court issued an arrest warrant, lifted the stay on the civil forfeiture case and scheduled a status conference. Sbeih’s counsel sought permission for Sbeih not to attend, as he was in Israel. Sbeih alleged that he was in danger of losing his Jerusalem permanent residency permit if he left Israel. The court granted the motion. The government moved to strike Sbeih’s claim under the fugitive disentitlement statute, 28 U.S.C. 2466. The court waited to see whether the Salouhas, Sbeih’s codefendants, were able to reenter the country, but ultimately granted the government’s motion to strike Sbeih’s claim and ordered forfeiture. While section 2466 requires the government to prove that the claimants had a specific intent of avoiding criminal prosecution in deciding to remain outside the U.S., it does not require that that intent be the sole or principal intent. In this case, however, government did not meet its burden of proving that Sbeih was not returning to the U.S. to avoid prosecution View "United States v. $525,695.24" on Justia Law

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The government sought forfeiture (21 U.S.C. 881(a)(4),(6), (7); 18 U.S.C. 981) of bank accounts, real properties, vehicles, and $91,500 in U.S. currency, related to its investigation into Salouha and Sbeih. Salouha allegedly illegally sold prescription drugs through his Ohio pharmacies; Salouha and Sbeih allegedly laundered the receipts. Salouha and his wife claimed several assets. Salouha was indicted but failed to appear. The court issued an arrest warrant. Permission for Salouha to attend a status conference regarding the forfeiture via telephone was denied. Salouha, his pregnant wife and four children, had moved to Gaza after the asset seizure; travel restrictions made their return difficult. Salouha did not attend. The government moved to strike his claims under the fugitive disentitlement statute, 28 U.S.C. 2466. The court waited to see whether Salouha could return with the help of the State Department. Salouha did not to respond. The court struck the claims but did not order forfeiture. Seven months later, the court approved a Stipulated Settlement Agreement and Decree of Forfeiture, under which Salouha’s wife withdrew her claims to all but a house and car. The remaining properties, claimed by the Sbeihs, were ordered forfeited the following month. Weeks later the Salouhas unsuccessfully moved to vacate the judgment. The Sixth Circuit affirmed. The district court properly credited the government's uncontested statements, and relied on the knowledge of Mrs. Salouha’s return, to conclude that Salouha was deliberately staying outside U.S. jurisdiction to avoid prosecution. View "United States v. $525,695.24" on Justia Law

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In 1990, Stan and Bara Jurcevic opened an account at the St. Paul Croatian Federal Credit Union (SPCFU). The National Credit Union Administration Board (NCUAB) charters and insures credit unions, 12 U.S.C. 1766, and can place a credit union into conservatorship or liquidation. From 1996-2010, Stan obtained $1.5 million in share-secured loans from SPCFU. Federal auditors discovered that SPCFU’s COO had been accepting bribes in exchange for issuing loans and disguising unpaid balances. SPCFU had $200 million in unpaid debts. NCUAB placed SPCFU into conservatorship and eventually liquidated its assets. NCUAB alleged that Jurcevic failed to disclose a $2,500,000 loan from PNC and an impending decrease in his income; and that he planned to use the loan funds to save his company, Stack. PNC obtained a $2,000,000 judgment against Jurcevic and Stack. NCUAB sued the Jurcevics and Stack and obtained an injunction, freezing the Jurcevics’ and Stack’s assets, except for living expenses. The district court dismissed claims of fraud, conspiracy, and conversion as time-barred and dismissed claims against Bara and Stack as a matter of law. Jurcevic appealed and filed for Chapter 7 bankruptcy. The Board cross-appealed and intervened in the Chapter 7 proceedings. The Sixth Circuit affirmed the asset freeze; the court properly employed the preliminary injunction factors. The court reversed the dismissals because the court did not consider the date of the NCUAB’s appointment and the date of discovery as possible accrual dates for the limitations statute. View "National Credit Union Administration Board v. Jurcevic" on Justia Law

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Sixth Circuit upholds allowing jury questions in online extortion case. Using the pseudonym “Dr. Evil,” an extortionist demanded $1 million in Bitcoin in exchange for an encryption key to Mitt Romney’s unreleased tax returns, which he claimed to have stolen from an accounting firm. He posted an image of Mike Myers’s Dr. Evil, from an Austin Powers movie, in the accounting firm’s Franklin, Tennessee office lobby. Agents traced the scheme to Brown, who had not actually stolen Romney’s returns. With 12 convictions for wire fraud and extortion, Brown was given a four-year prison sentence, and ordered to pay restitution. The Sixth Circuit affirmed his conviction, rejecting arguments that the search warrant lacked probable cause and that Brown was prejudiced by the judge allowing questions from the jury. The affidavit offered “a fair probability” that Brown’s home would contain evidence of the crime. Understanding the evidence required the jury to grasp the Secret Service’s forensic analysis of thumb drives, online posts, and Brown’s computers, Bitcoin, fingerprint matching, and digital photo manipulation-- enough complexity for a court to believe that permitting questions might aid jurors. The court vacated the sentence. Brown’s statements to prosecutors did not significantly impede the investigation, to justify the obstruction of justice enhancement. View "United States v. Brown" on Justia Law

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Simmerman began working at Shoreline Federal Credit Union in 1987 and became manager in 2006. She began embezzling money, by complex manipulation of ledgers, in 1998 and was discovered in 2014. She pled guilty to embezzling $1,528,000, 18 U.S.C. 657, and to structuring the deposits of the money she stole to evade the reporting requirements of 31 U.S.C. 5313(a), in violation of 31 U.S.C. 5324(a)(3) and (d)(1). The district court assessed Simmerman’s total offense level at 28, based on a base offense level of seven, a 16-level increase for a loss amount between $1 million and $2.5 million, a two-level increase for sophisticated means, four-level increase for jeopardizing the soundness of a financial institution, a two-level increase for abuse of a position of trust, and a three-level reduction for acceptance of responsibility and a timely plea. With a criminal history category of I, Simmerman’s guideline range was 78-97 months and she was sentenced to 78 months on Count 1 and 60 months on Count 2, to be served concurrently. The Sixth Circuit affirmed, upholding the imposition of enhancements for sophisticated means (U.S.S.G. 2B1.1(10)(C)); jeopardizing the soundness of a financial institution (U.S.S.G. 2B1.1(b)(16)(B)(i)); and abuse of a position of trust (U.S.S.G. 3B1.3). View "United States v. Simmerman" on Justia Law

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Between 2012 and 2014, three University of Michigan students (plaintiffs) rented rooms from Alawi, which collected $2550 in security deposits from the three. When they moved out, they received their security deposits back, minus small deductions for minor damages to the properties. Plaintiffs believed that Alawi had not complied with Michigan law, which requires landlords to deposit security deposits in a regulated financial institution and to provide the address of that institution to the tenant. The plaintiffs sued Alawi for $6.6 million on behalf of a putative class of six years’ worth of tenants, alleging violations of Racketeer Influenced and Corrupt Organizations Act (RICO) and Michigan law; alleging that Alawi was not entitled to hold security deposits at all (given these alleged breaches of Michigan law), and that knowingly taking security deposits anyway constituted a pattern of federal wire, mail, and bank fraud. The Sixth Circuit affirmed dismissal, finding that the plaintiffs lacked standing to bring the RICO claim. The complaint failed to articulate any concrete injury; its allegations were too vague to meet the particularity requirement of fraud allegations under Civil Rule 9(b). View "Wall v. Michigan Rental" on Justia Law

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The Internal Revenue Service classified Ballard, a securities broker, as a non-filer in 2008 and investigated. Ballard lied about his income, hid money in family members’ bank accounts, and filed then dismissed several Chapter 13 bankruptcy petitions, attempting to avoid paying $848,798 in taxes arising from his income between 2000 and 2008. He eventually pled guilty to violating 26 U.S.C. 7212(a), which prohibits “corruptly . . . obstruct[ing] or imped[ing] . . . administration of [the tax laws].” Ballard urged the court to use the U.S.S.G. for obstruction of justice. The district court rejected Ballard’s argument that he never intended to evade paying his taxes but was merely delaying the payments and used the tax evasion guideline to calculate a higher offense level and an increase in the sentencing range from eight–14 months to 24–30 months. Ballard was sentenced to 18 months’ incarceration. The Sixth Circuit affirmed. What matters in the choice between guidelines sections is which section is more precisely tailored to reflect offense characteristics—like tax evasion and tax loss—and which section covers a more closely related group of crimes. What Ballard did, and what the government charged, was a lie to the tax collector about his earnings. View "United States v. Ballard" on Justia Law

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The accreditation of White’s travel agency, CTC, was revoked in 2003 after audits conducted by United Airlines uncovered fraudulent ticketing schemes that cost the airline $100,000 in airfares. White continued working as a subcontractor for other travel agencies and continued to obtain fraudulent ticket fares by providing false information about her clients’ ages, possession of discount certificates, and military status. White charged service fees and airfare directly to her clients’ credit cards, sometimes for persons other than those clients, and sometimes without their permission. When travel agencies violate an airline’s fare policy and cause financial loss, the airline issues Agency Debit Memoranda (ADM), requiring payment. A travel agent testified that within two years, his agency received more than $100,000 in ADMs based on airfare that White booked. When White was asked for proof that her customers qualified for military discounts, she created false Armed Forces Identification cards using customers’ real names and dates of birth. The airlines determined that the cards were fraudulent and notified the Secret Service. White was charged with wire fraud and aggravated identity theft. The district court permitted White to examine witnesses about actual repayments that were made to victims; White was not permitted to disclose loss-recoupment negotiations that took place long after White was confronted by her victims. White was sentenced to a total of 94 months in prison. The Sixth Circuit affirmed, rejecting arguments the district court read an improper definition of the term “use” into the aggravated identity theft statute; erred in refusing to admit evidence of White’s intention to repay some of the losses; and erred in calculating victims’ losses. View "United States v. White" on Justia Law