Articles Posted in White Collar Crime

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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

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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

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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

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Contractual disclaimers of reliance on prior misrepresentations do not render those misrepresentations immaterial under the criminal mail and wire fraud statutes. The Second Circuit affirmed defendant's conviction and sentence for conspiring to commit mail and wire fraud, substantive counts of both, and making false statements to a government agent. Defendant's conviction stemmed from his work at Vendstar, a company that sold valueless vending machine business opportunities to its victims. The court held that, although contractual disclaimers were relevant to the jury's determination of defendant's guilt, they did not render extra-contract misrepresentations immaterial as a matter of law. View "United States v. Weaver" on Justia Law

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Plaintiff challenged the dismissal of his Racketeer Influenced and Corrupt Organizations Act (RICO) and state law claims against the principals of a Venezuelan energy company. The Second Circuit affirmed the dismissal of the RICO claims because plaintiff failed to allege that defendants engaged in a pattern of racketeering activity. Plaintiff's first theory failed because the predicate acts posed no continuing threat of racketeering. Plaintiff's second theory failed because the predicate acts he chose were insufficiently related to each other. The court also affirmed the dismissal of the state law claims because plaintiff failed to establish personal jurisdiction over either defendant. View "Reich v. Betancourt Lopez" on Justia Law

Posted in: White Collar Crime

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Defendant appealed her conviction of one count of embezzling funds from her company's 401(k) plan, and the forfeiture order entered against her. The court affirmed the conviction in a summary order issued contemporaneously with this opinion. At issue here was the amount of defendant's forfeiture order. The court held that mandatory criminal forfeiture amounts may not be reduced by the amount of restitution in the absence of specific statutory authorization for such an offset. Because the district court lacked the discretion to reduce defendant's forfeiture order in this case, the court affirmed as to this issue. View "United States v. Bodouva" on Justia Law

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Defendants Dey and Finazzo were involved in a conspiracy to use South Bay as a supplier of Aeropostale apparel in exchange for secret payments. Finazzo was a former merchandising executive for Aeropostale, and Dey controlled South Bay, a clothing vendor. Dey plead guilty to conspiracy, and a jury convicted Finazzo of one count of conspiracy to commit mail and wire fraud and to violate the Travel Act, 18 U.S.C. 371, fourteen counts of mail fraud, and one count of wire fraud. The court affirmed the district court's jury instructions regarding the "right to control" property under the mail and wire fraud statutes; concluded that there was sufficient evidence to support the challenged portions of the jury verdict; but, vacated and remanded the district court's restitution order as to Finazzo and Dey. In a simultaneously issued summary order, the court affirmed the remaining issues on appeal. View "United States v. Finazzo" on Justia Law

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Defendant was convicted of wire fraud and conspiracy to commit wire fraud. The district court sentenced defendant to 120 months in prison, entered an order of forfeiture in the amount of $2.4 million, and ordered restitution in the amount of $2.4 million. The court concluded that the district court erred in applying the two sentencing enhancements for receiving gross receipts in excess of $1 million from a financial institution pursuant to U.S.S.G. 2B1.1(b)(16)(A) and for abuse of a position of trust pursuant to U.S.S.G. 3B1.3. In a summary order published contemporaneously with this opinion, the court affirmed the district court’s judgments on the indictment and sentencing enhancement for a loss figure of $8.1 million, and declined to resolve defendant's ineffective assistance of counsel claim. View "United States v. Huggins" on Justia Law

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Defendants Ahmed A. Algahaim and Mofaddal M. Murshed appealed their convictions for offenses concerning the misuse of benefits under the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). The court affirmed the convictions and sentence. The court remanded to permit the sentencing judge to consider non-Guidelines sentences in view of the significant effect of the loss enhancement in relation to the low base offense level. View "United States v. Murshed (Algahaim)" on Justia Law

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Defendant, the owner and operator of a freight service that couriered items to and from the United States and Canada, was found guilty of nine counts of tax-related offenses. Defendant was charged with violating 26 U.S.C. 7212(a), which imposes criminal liability on one who ʺcorruptly or by force or threats of force . . . endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title.” Another portion of the statute, often referred to as the ʺomnibus clause,ʺ imposes criminal liability on one who ʺin any other way corruptly . . . obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title.ʺ On appeal, defendant argued that the court, like the Sixth Circuit, should construe the phrase ʺthe due administration of this titleʺ in the omnibus clause to include only a pending IRS action of which a defendant was aware. The court rejected defendant's argument and joined three of its sister circuits in concluding that section 7212(a)ʹs omnibus clause criminalizes corrupt interference with an official effort to administer the tax code, and not merely a known IRS investigation. The court also concluded that an omission may be a means by which a defendant corruptly obstructs or impedes the due administration of the Internal Revenue Code under section 7212(a). Finally, the court concluded that the district court did not commit procedural error by using the manner of calculating the tax loss and restitution amounts that it did, or by deciding not to apply a two‐level reduction to defendant's base offense level for acceptance of responsibility. Accordingly, the court affirmed the judgment. View "United States v. Marinello" on Justia Law