Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Snelling defrauded investors by soliciting funds for two fictitious financial companies, CityFund and Dunhill, which supposedly invested clients’ money in overseas mutual funds and overnight depository accounts, and promised investors an annual return of 10 to 15%. In reality, Snelling and his partner operated a Ponzi scheme in which “returns” on earlier investors’ capital were part of new investors’ deposits. The rest of the new deposits went to Snelling and his partner, who used the money to buy vacation houses and boats, pay private-school tuition, and live extravagantly. Among the tactics they employed were intentional targeting of victims’ IRA and 401(k) accounts, issuance of false quarterly statements by mail and, in confronting investors’ suspicions, production of false records that showed a balance of $8.5 million in the fund when it actually held $995.. Neither Snelling nor his partner paid taxes on the diverted funds. Snelling pled guilty to conspiracy to commit mail and wire fraud, 18 U.S.C. 1349; obstruction of justice, 18 U.S.C. 1519 and 2; and tax evasion, 18 U.S.C. 7201. Snelling appealed his 131-month prison sentence, claiming that the Guidelines-range calculation employed a loss figure that did not take into account the sums paid back to investors in the course of the fraud. The Sixth Circuit agreed and vacated the sentence.View "United States v. Snelling" on Justia Law

Elsass and his companies, FRG, and STS, were charged with violations of the Tax Code, including claiming theft-loss deductions for losses that did not involve criminal conduct, claiming those deductions before it was clear that there was no reasonable prospect of recovery, falsely characterizing theft losses as losses incurred in a trade or business to artificially inflate refunds, claiming theft-loss deductions to which taxpayers were not entitled because the losses were incurred by deceased relatives, negotiating customers’ tax-refund checks and depositing them into defendants’ bank accounts, falsely indicating that Elsass was an attorney in good standing, making deceptive statements to customers that substantially interfered with the administration of the tax laws, promoting an abusive tax shelter through false or fraudulent statements about the tax benefits of participation, and aiding and abetting the understatement of tax liability. The district court held that there was no genuine issue as to whether Elsass and FRG had engaged in each of these prohibited practices and enjoined them from serving as tax-return preparers. While it granted summary judgment to STS with respect to all claims except on, because STS is wholly owned by Elsass, it enjoined STS to the same extent as Elsass and FRG. The Sixth Circuit affirmed. View "United State v. Elsass" on Justia Law

The Federal Trade Commission (FTC) filed a complaint alleging that Defendants fraudulently marketed and sold debt-related services, failed to provide those services, and retained money as upfront fees in violation of the FTC Act, 15 U.S.C. 45(a); the Telemarketing Sales Rule, 16 C.F.R. 310; and the Mortgage Assistance Relief Services Rule, 12 C.F.R. 1015. The FTC also sought a temporary restraining order and a preliminary injunction, and provided more than 1,000 pages of exhibits. Defendants sought to stay proceedings, asserting that a criminal investigation had been launched into their business activities, as evidenced by a raid conducted by the Royal Canadian Mounted Police that resulted in seizure of records they claim were necessary to defend against the FTC’s allegations. The district court denied the motion; the FTC and Defendants entered into a stipulated preliminary injunction. Defendants later renewed the motion for a stay, claiming that they were unable to access critical records. Without explanation, the district court denied the motion and later granted the FTC’s motion for summary judgment, ordering Defendants to jointly pay restitution in the amount of $5,706,135.48 to injured consumers. The Sixth circuit affirmed, finding clear evidence of the violations. View "Fed. Trade Comm'n v. E.M.A. Nationwide, Inc." on Justia Law

In 2001, Mirando pleaded guilty to mail fraud, money laundering, and tax evasion relating to the 1995 and 1996 tax years. Following his 2003 release from prison, the IRS assessed additional tax, interest, and penalties for the 1995 and 1996 tax years and for unpaid tax liabilities for 2000 and 2004. In 2007, Mirando was indicted for conspiracy to defraud the United States and four counts of tax evasion, one for each of the 1995, 1996, 2000, and 2004 tax years. He again pleaded guilty. The parties stipulated that as of June 2007, the total tax liability, including interest and penalties, amounted was $448,776.13. Mirando made payments to the IRS before entering his plea, totaling $467,686.04, inexplicably paying $18,909.91 more than the agreed amount. He was sentenced to 50 months’ imprisonment. In 2008, Mirando and his ex-wife filed amended returns, claiming refunds for the taxable years 1995, 1996, and 2000 in the amounts of $38,871, $54,112, and $32,332, respectively. The IRS denied the claims. Mirando filed a tax refund suit. The IRS argued that judicial estoppel barred Mirando from challenging the amount; Mirando argued that the government waived its estoppel argument because it failed to assert it as an affirmative defense. The Sixth Circuit affirmed the district court’s entry of summary judgment in favor of the IRS.View "Mirando v. U.S. Dep't of Treasury" on Justia Law

From 1998 to 2010, Dimora was one of three elected Cuyaho County commissioners. From 2005 to 2010, Gabor worked for the county weights-and-measures office, which inspects gas pumps, grocery store scanners, truck scales and the like for accuracy. In 2007, the FBI began investigating public corruption in Cuyahoga County and discovered that Dimora handed out public jobs, influenced Cleveland decision-makers and steered public contracts in return for about 100 bribes worth more than $250,000. Gabor bought his job for $5,000 and spent most of his time on errands for Dimora that were unrelated to the job, including acting as a go-between in arranging kickback schemes on county projects. When Gabor learned that the FBI was investigating him, he warned his co-conspirators about the investigation and tried to convince them to lie. After a 37-day trial, they were convicted of 39 violations of anti-corruption laws. The district court sentenced Dimora to 336 months in prison and Gabor to 121 months. The Sixth Circuit affirmed, rejecting challenges to a jury instruction for the RICO charge, 18 U.S.C. 1962(c), (d); to the sufficiency of the evidence; and to various evidentiary rulings. View "United States v. Dimora" on Justia Law

Patriot was authorized to issue title policies underwritten by First American in Michigan. In 2007, Patriot closed a transaction and provided title insurance and a closing protection letter (CPL) when which WaMu loaned $4,543,593.07 to Truong for the purchase of property in Grosse Ile. In the CPL, First American agreed to indemnify WaMu for actual losses arising from Patriot’s fraud or dishonesty in connection with the closing. In 2008, First American discovered that the Truong transaction was a sham, orchestrated by Patriot’s owner, and obtained title to the property. During negotiations concerning sale of the property, federal regulators closed WaMu. The FDIC became its receiver and sold most of WaMu’s assets to Chase, including the title insurance commitment issued in connection with the Truong transaction. Attempting to resolve the claim, First American tendered a quitclaim deed. Chase refused to accept that deed. First American sought a declaration that First American had fulfilled its obligations under the commitment by tendering a deed to the property. Chase sought a declaration that the deed was void and requested money damages. The FDIC intervened, alleging breach of contract against First American based on the CPL. After the property was sold, First American and Chase stipulated to dismissal of Chase’s claims against First American and First American’s claims against Chase. Chase and the FDIC entered into a stipulation that Chase did not acquire the CPL claim that the FDIC was pursuing. A jury awarded the FDIC $2,263,510.78. The Sixth Circuit affirmed.View "JP Morgan Chase Bank NA v. First Am. Title Ins. Corp." on Justia Law

Nancy and Lester's Kentucky pain-management clinic closed after the DEA confiscated the doctor’s license for overprescribing narcotics. They then opened two clinics in Ohio. Patients would arrive before they opened, filling the parking lot, where they used drugs and traded prescription forms. Patients often traveled long distances (in groups), although most lived closer to other clinics. After paying their $150 appointment fee (cash only), patients would meet an “assessor” who would review their “day sheet” and provide a completed prescription form for hydrocodone, oxycodone, or other pain medication. Staff completed day sheets and prescription forms in advance. Patients then met the doctor for a minute. About 100 people per day completed this “five minute” process. The clinics also treated phantom patients. Nancy supervised the updating of files for people who had never visited the clinics. The doctor would sign prescriptions for phantom patients, staff would fill the prescriptions, and the pain pills were sold on the street by a Sadler relative. The clinics ordered drugs directly from pharmaceutical companies, but never obtained a license to dispense controlled substances. The Sadlers were convicted of conspiring to distribute controlled substances illegally and maintaining a premises for distributing the substances; Nancy was also convicted of wire fraud and money laundering. The district court sentenced Lester to 151 months and Nancy to 210 months. The Sixth Circuit vacated the wire fraud conviction, but otherwise affirmed. Nancy may have had many bad motives in buying the pills, but unfairly depriving the distributors of their property was not among them; she ordered pills and paid the asking price. View "United States v. Sadler" on Justia Law

Kumar was 19 years old and in his first year in the Aviation Technology Program at Bowling Green State University when he was assigned to fly alone from Wood County Airport near Bowling Green to Burke Lakefront Airport in Cleveland, and back, after 10:00 p.m. The flight plan required him to fly over part of Lake Erie. On the return trip, Kumar observed what he believed to be a flare rising from a boat. He reported this sighting to Cleveland Hopkins International Airport and was instructed to fly lower for a closer look. Kumar could not then see a boat. Fearful of hurting his chances of one day becoming a Coast Guard pilot, he reported that he saw additional flares and described a 25-foot fishing vessel with four people aboard wearing life jackets with strobe lights activated. Kumar’s report prompted a massive search and rescue mission by the U.S. Coast Guard, and the Canadian Armed Forces. A month later, Kumar admitted that his report had been false. He pleaded guilty to making a false distress call, a class D felony per 14 U.S.C. 88(c)(1), which imposes liability for all costs the Coast Guard incurs. He was sentenced to a prison term of three months and ordered to pay restitution of $277,257.70 to the Coast Guard, and $211,750.00 to the Canadian Armed Forces. The Sixth Circuit affirmed. View "United States v. Kumar" on Justia Law

The Smith brothers and others operated Target Oil, which conducted speculative resource drilling in Kentucky, Tennessee, Texas, and West Virginia. Wells they represented as sure-fire investments often produced virtually no oil and many wells were never completed. From 2003 to 2008, Target Oil received about $15,800,000 in investor funds but, according to the postal inspector, distributed only $460,000 in royalties. The brothers were arrested and accused of conspiring with others to defraud investors of millions of dollars. Michael was convicted of conspiracy to commit mail fraud, 18 U.S.C. 1349, and of 11 substantive counts of mail fraud, 18 U.S.C. 1341, and sentenced to 120 months in prison and ordered to pay $5,506,917 in restitution. Christopher was convicted by the same jury on seven counts of mail fraud and was sentenced to 60 months in prison and ordered to pay $1,652,075 in restitution. The Seventh Circuit affirmed, rejecting arguments that: the evidence was insufficient to support their convictions; the government offered evidence that constructively amended or varied the indictment; their sentences are procedurally and substantively unreasonable; one of the forfeiture judgments was excessive; the district court erred in excluding a defense expert witness; and items of evidence relating to the alleged fraud were erroneously admitted. View "United States v. Smith" on Justia Law

During the 2000 presidential election, Dewald established and operated political action committees (PACs): “Friends for a Democratic White House” and “Swing States for a GOP White House.” He sent fundraising letters to political donors found on Federal Election Commission donor lists. The PACs collected about $750,000 in contributions, but Dewald remitted less than 20 percent of that amount to the political parties or to outside PACs. He funneled most the money to his for-profit corporation, which provided “consulting and administrative services” to the PACs. Dewald was convicted, under Michigan law, for obtaining money under false pretenses, common-law fraud, and larceny by conversion and ultimately sentenced to between 23 and 120 months. Rejecting Dewald’s preemption claim, the Michigan Court of Appeals reasoned that the Federal Election Campaign Act, 2 USC 453 has a narrow preemptive effect. Dewald unsuccessfully sought state post-conviction relief. Dewald later obtained federal habeas corpus relief 28 U.S.C. 2254, on grounds that FECA preempted state law and that the Michigan court’s determination was objectively unreasonable. The Sixth Circuit reversed. There is no clearly established federal law, as determined by the Supreme Court, holding that FECA precludes a state from prosecuting fraud in the context of a federal election. Even if federal preemption provides “clearly established federal law” in general, the state decision did not unreasonably apply those general principles to this case. View "Dewald v. Wriggelsworth" on Justia Law