Articles Posted in White Collar Crime

The Second Circuit affirmed the district court's order requiring defendant to pay a civil penalty of almost $93 million in a civil suit brought by the SEC. Defendant was the managing general partner and portfolio manager of Galleon Management and its affiliated hedgefunds. Defendant was found to have executed trades in Galleon's accounts and in the account of Rajiv Goel, an Intel executive who had provided tips to defendant, in the stock of five companies on the basis of inside information. The court held that a plain reading of Section 21A(a)(2) of the Securities and Exchange Act indicates that it permits a civil penalty to be based on the total profit resulting from the violation. In this case, defendant executed Galleon's and Goel's illegal trades and thus his civil penalty could be calculated under subsection (a)(2) based on the profit gained or loss avoided as a result of defendant's unlawful purchases and sales. The court also held that the district court did not abuse its discretion by determining that every factor in SEC v. Haligiannis, 470 F. Supp. 2d 373, 386 (S.D.N.Y. 2007), favored the use of a treble penalty. View "SEC v. Rajaratnam" on Justia Law

Defendant appealed his sentence after he pleaded guilty to an information charging securities fraud, mail fraud, and obstruction and impeding the Internal Revenue Laws. Defendant, a former registered investment broker, perpetrated fraud on the clients of ELIV Group, an unregistered investment and consulting group that he owned and operated. The Second Circuit vacated in part the district court's sentence of incarceration as procedurally unreasonable because of an incorrect criminal history finding. Accordingly, the court remanded as to this issue. The court affirmed the district court's imposition of the amended restitution order where the district court corrected the restitution amount during resentencing. View "United States v. Valente" on Justia Law

Petitioner appealed the district court's denial of his 28 U.S.C. 2255 motion to vacate his securities fraud convictions in light of United States v. Newman, 773F.3d438 (2dCir. 2014), in which the Second Circuit reversed the insider trading convictions of two tippers. The court affirmed the judgment and held that petitioner presented no viable claim that the personal benefit challenge was unavailable to his counsel on appeal; petitioner failed to show prejudice where the personal benefit instructions he challenged were so flawed as to deny him due process; and petitioner has not demonstrated his actual innocence where the evidence contained ample evidence that petitioner was in a conspiracy to trade on the basis of non public information and that petitioner benefited financially from the trading. View "Gupta v. United States" on Justia Law

The Second Circuit affirmed defendant's conviction of conspiracy to commit securities fraud and securities fraud. In this case, defendant was a tipper who did not directly trade on material, non‐public information but rather shared it with a tippee who did. The court held that the evidence was sufficient to prove his criminal intent where the jury was not required to credit defendant's deposition testimony that he intended only to brag when he tipped his friend and financial advisor about an upcoming merger, and the evidence taken as a whole permitted the jury to find beyond a reasonable doubt that defendant intended his communication to lead to trading in securities of the company in question. View "United States v. Klein (Schulman)" on Justia Law

Defendant, a professional sports gambler, appealed his conviction of securities fraud and related crimes. The Second Circuit held that, although it was undisputed that a special agent's leaks to reporters violated the grand jury secrecy provision of Federal Rule of Criminal Procedure 6(e), dismissal of the indictment was not appropriate in these circumstances where defendant failed to demonstrate prejudice by the agent's actions. Furthermore, the court noted that there was no due process violation where the violations were not so systematic and pervasive as to raise a substantial and serious question about the fundamental fairness of the process resulting in the indictment, nor were they so outrageous that they violated common notions of fairness and decency. The court also held that the district court did not clearly err in its factual determinations or abuse its discretion in denying the Rule 33 motion, and the evidence was insufficient to support defendant's counts of conviction related to Darden. Finally, the court vacated and remanded the restitution order, and affirmed the forfeiture order. View "United States v. Walters" on Justia Law

The Second Circuit vacated defendant's conviction of charges related to his involvement in an insider trading scheme where he provided material, nonpublic information to his father. At issue was the so-called "silver platter statement," where defendant purportedly told his father that he expected his father to invest based upon information to which defendant had access through his work as an investment banker. The court held that excluding the father's post-arrest FBI interview was not harmless. In this case, defendant should not have been precluded from impeaching the silver platter statement. The court held that, because the impeachment material might have undermined the silver platter statement in the eyes of the jury, it risked leaving the government with a substantially weaker case as to defendant's intent such that a guilty verdict would be far from assured. View "United States v. Stewart" on Justia Law

The Second Circuit affirmed defendant's conviction for conspiring to engage in racketeering in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). The court held that the government was not precluded from using acquitted substantive offenses as racketeering predicates in the second RICO conspiracy charge; the government was not precluded from using acquitted non-RICO conspiracy offenses as racketeering predicates in the second RICO conspiracy charge; and the district court properly admitted evidence from the first trial because the evidence was used for different, non-precluded purposes in the second trial. The court also held that the district court did not err by allowing a transcript that identified defendant as the speaker to serve as a jury aid with respect to the properly-admitted recording, and in allowing the transcript to be reviewed by the jury during its deliberations. Finally, the court rejected defendant's claim of cumulative error. View "United States v. Zemlyansky" on Justia Law

The Second Circuit vacated the district court's grant of defendant's motion to dismiss two counts of an indictment charging him with federal-program embezzlement. Defendant, a former New York State Senator, allegedly embezzled funds from escrow accounts that he oversaw in his capacity as a referee for foreclosure actions. The court agreed with the government that the district court erred by concluding pretrial, as a matter of law, that defendant necessarily formed the fraudulent intent required for the charged embezzlements -- and thus completed those embezzlements -- once he failed to remit the funds. Therefore, the court held that the district court made a premature factual determination regarding the time at which defendant, if guilty, formed the requisite fraudulent intent. The court reinstated the two federal-program embezzlement counts and remanded for further proceedings. View "United States v. Sampson" on Justia Law

The Second Circuit affirmed defendant's conviction for obstruction of justice and making false statements to federal agents. Defendant, a former New York State Senator, was convicted of crimes related to his efforts to use his position in the Senate to provide a local businessman with special favors. Defendant provided the businessman with these favors in exchange for a loan that was given to defendant to reimburse funds that he had embezzled, but that he could not repay. The court held that United States v. Hernandez, 730 F.2d 895 (2d Cir. 1984), and United States v. Masterpol, 940 F.2d 760 (2d Cir. 1991), barred the government from prosecuting an individual under 18 U.S.C. 1503(a) for intimidating and threatening witnesses or corruptly persuading witnesses to recant their testimony. However, these cases did not bar the government from prosecuting an individual under section 1503(a) for an inchoate endeavor to witness tamper. The court also held that the district court did effectively instruct the jury on whether defendant willfully caused an obstruction of justice under 18 U.S.C. 2; the evidence was sufficient to convict defendant for making a false statement; the district court district court did not abuse its discretion—or violate the Confrontation Clause—in either of defendant's challenged evidentiary rulings; and defendant's sentence was reasonable. View "United States v. Sampson" on Justia Law

The Second Circuit affirmed the district court's judgment after defendant pleaded guilty to tax evasion and to corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws. Defendant, the founder of an investment management firm, was sentenced to pay restitution of $37 million, serve a 70‐month term of imprisonment, and pay a $10 million fine. The Second Circuit held that the district court did not err in calculating the fine range recommended by the Sentencing Guidelines; defendant was given adequate opportunity to inform the district court of his financial condition and ability to pay a fine; and imposing a $10 million fine was within the district court’s discretion. Defendant's motion to stay his sentence pending this appeal was moot. View "United States v. Zukerman" on Justia Law