Articles Posted in White Collar Crime

The Second Circuit denied a petition for a writ of error coram nobis where petitioner sought vacatur of his prior conviction and sentence for conspiracy to commit mail and wire fraud, as well as 21 counts of mail fraud, based on his conduct in the rare-coins business. Petitioner contended that newly discovered evidence would undermine the reliability of expert testimony submitted against him at trial. The court held that, given the strength of evidence of defendant's fraudulent activity in support of his sale of coins, the issue he raised as to the government expert's method of valuation did not show circumstances compelling grant of the writ to achieve justice. View "Du Purton v. United States" on Justia Law

The Second Circuit vacated defendant's conviction for securities fraud. The court held that although defendant's misstatements could be found by a jury to be material, the district court materially erred in admitting evidence that the counter-party representative in the sole transaction underlying the count of conviction mistakenly believed that defendant was his agent. Therefore, the evidence was prejudicial and the court could not conclude with fair assurance that the jury would have convicted defendant absent such evidence. Accordingly, the court remanded the judgment of conviction, ordering defendant be released on appropriate bond pending further proceedings. View "United States v. Litvak" on Justia Law

The Second Circuit vacated defendant's conviction for securities fraud. The court held that although defendant's misstatements could be found by a jury to be material, the district court materially erred in admitting evidence that the counter-party representative in the sole transaction underlying the count of conviction mistakenly believed that defendant was his agent. Therefore, the evidence was prejudicial and the court could not conclude with fair assurance that the jury would have convicted defendant absent such evidence. Accordingly, the court remanded the judgment of conviction, ordering defendant be released on appropriate bond pending further proceedings. View "United States v. Litvak" on Justia Law

The Second Circuit held that the district court lawfully denied defendant's motion for attorney's fees and other litigation expenses under the Hyde Amendment of 1997. The court joined its sister circuits in holding that the standard of review applicable to the appeal of a district court's denial of a defendant's application for attorney's fees and other litigation expenses pursuant to the Hyde Amendment was abuse of discretion. The court adopted the reasoning by the Fifth Circuit in United States v. Truesdale, 211 F.3d 898, 905–06 (5th Cir. 2000). In this case, the district court did not abuse its discretion by denying defendant's application and concluding that the position of the United States was not vexatious, frivolous, or in bad faith, since no controlling precedent foreclosed the government's theory of prosecution and some language in the court's case law arguably supported it, and since defendant's other arguments against the government's case, including those not expressly addressed above were meritless. View "United States v. Larson" on Justia Law

Larson was involved with—and later convicted of crimes related to—the organization of fraudulent tax shelters. The IRS then required organizers/promoters to register tax shelters not later than the day of the first offering for sale, 26 U.S.C. 6111(a). Organizers/promoters who failed to register were subject to a penalty of the greater of one percent of the aggregate amount invested in the tax shelter, or $500. Eight years after the IRS notified Larson that he was under investigation, it informed him that it considered him an organizer with a duty to register and was subject to penalties of $160,232,0261 for failure to do so. The IRS Office of Appeals reduced the penalties to $67,661,349, stating that Larson would need to pay the remaining penalty and file a Claim for Refund if he wanted to contest the assessment. Larson paid $1,432,735 and filed his Refund Claim. The IRS rejected Larson’s claim for failure to pay the entire amount. Larson filed suit. The government moved to dismiss, arguing that because Larson had not paid the assessed penalties in full, the court lacked jurisdiction. The court agreed, concluding that application of the full-payment rule did not violate Larson’s due process rights. The Second Circuit affirmed, holding that the full‐payment rule applies to Larson’s section 6707 penalties and that his tax refund, due process, Administrative Procedure Act, and Eighth Amendment claims were properly dismissed. View "Larson v. United States" on Justia Law

28 U.S.C. 2255 jurisdiction does not reach the restitution part of a sentence where, as here, the restitution cannot be deemed custodial punishment. It is not the amount of restitution alone but, rather, the terms of payment that identify those rare cases in which a restitution order might equate to custodial punishment. The Second Circuit held that, because the challenged judgments in this case contemplate the payment of restitution on schedules yet to be set by the district court, defendants could not show on the present record that their restitution obligations were custodial punishments for purposes of section 2255 review. Therefore, the court vacated the judgments reducing restitution and remanded for reinstatement of original judgments. View "United States v. Rutigliano" on Justia Law

Defendant was convicted of conspiring to misappropriate and sell property of AOL and was ordered to pay AOL restitution. On appeal, defendant challenged the district court's denial of his motion for a reduction of his remaining restitution obligation by amounts recovered by AOL in civil litigation against other persons. The district court concluded that defendant failed to show that those amounts recovered by AOL were compensation for the same loss caused by defendant or that AOL has been fully compensated for the loss caused by him. The Second Circuit considered defendant's contentions and found that they were without merit. The court affirmed the judgment and held that the district court did not abuse its discretion in determining that justice required that defendant have the burden of proving that recoveries by AOL in civil litigation were for the same loss that he caused and that AOL has been compensated in full for the loss defendant caused. View "United States v. Smathers" on Justia Law

Defendant was convicted of one count of conspiracy to commit securities fraud and two counts of securities fraud in connection with an insider trading scheme. After defendant's conviction, the Second Circuit issued a decision in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), which elaborated on the Supreme Court's ruling in Dirks v. S.E.C., 463 U.S. 646 (1983), concerning liability for a "tippee" who trades on confidential information obtained from an insider, or a "tipper." While defendant's appeal was pending, the Supreme Court issued a decision in Salman v. United States, 137 S. Ct. 420 (2016), which rejected certain aspects of Newman's holding. The court held that the logic of Salman abrogated Newman's "meaningfully close personal relationship" requirement and that the district court's jury instruction was not obviously erroneous. The court also held that any instructional error would not have affected defendant's substantial rights because the government presented overwhelming evidence that at least one tipper received a financial benefit from providing confidential information to defendant. Accordingly, the court affirmed the judgment. View "United States v. Martoma" on Justia Law

The Fifth Amendment's prohibition on the use of compelled testimony in American criminal proceedings applies even when a foreign sovereign has compelled the testimony.  When the government makes use of a witness who had substantial exposure to a defendant's compelled testimony, it is required under Kastigar v. United States, 406 U.S. 441 (1972), to prove, at a minimum, that the witness's review of the compelled testimony did not shape, alter, or affect the evidence used by the government.  A bare, generalized denial of taint from a witness who has materially altered his or her testimony after being substantially exposed to a defendant’s compelled testimony is insufficient as a matter of law to sustain the prosecution’s burden of proof. In this case involving the London Interbank Offered Rate (LIBOR), defendants were convicted of wire fraud and conspiracy to commit wire fraud and bank fraud. The Second Circuit held that defendants' compelled testimony was "used" against them, and this impermissible use before the petit and grand juries was not harmless beyond a reasonable doubt.  Accordingly, the court reversed the judgments of conviction and dismissed the indictment. View "United States v. Allen" on Justia Law

The Second Circuit vacated and remanded defendant's conviction for all counts related to the abuse of his public position by engaging in two quid pro quo schemes in which he performed official acts in exchange for bribes and kickbacks. Defendant, the former Speaker of the New York State Assembly, then laundered the proceeds of his schemes into private investment vehicles. Although the court rejected defendant's sufficiency challenges, the court held that the district court's instructions on honest services fraud and extortion did not comport with McDonnell v. United States, 136 S. Ct. 2355 (2016), and were therefore in error. McDonnell clarified the definition of an "official act" in honest services fraud and extortion charges. The court further held that this error was not harmless because it was not clear beyond a reasonable doubt that a rational jury would have reached the same conclusion if properly instructed, as was required by law for the verdict to stand. View "United States v. Silver" on Justia Law