Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Kay Ellison, co-founder of a charter airline, was convicted of federal wire fraud, bank fraud, and conspiracy. The airline, Direct Air, faced cash flow issues and Ellison siphoned millions from an escrow account through fictitious reservations and falsified records. She was charged alongside Judy Tull and chose not to testify or present a defense at trial. The jury convicted her on all counts, and she was sentenced to ninety-four months in prison and ordered to pay over $19 million in restitution. Her convictions were affirmed on direct appeal.Ellison filed a motion to vacate her sentence under 28 U.S.C. § 2255, claiming ineffective assistance of counsel. She argued her attorney incorrectly advised her that if she did not testify, she could not present other evidence, which she claimed prejudiced her defense. The United States District Court for the District of New Jersey denied her motion without an evidentiary hearing, concluding that even if her counsel was ineffective, she could not show prejudice because there was no reasonable probability that the jury would have acquitted her if she had testified or presented other witnesses.The United States Court of Appeals for the Third Circuit reviewed the case and affirmed the District Court's decision. The Third Circuit applied the Strickland v. Washington standard, which requires showing a reasonable probability that the result of the proceeding would have been different but for the attorney's errors. The court found that Ellison failed to demonstrate such a probability, as her proposed testimony and that of her witnesses would not have likely changed the jury's verdict given the strong evidence against her. Thus, the denial of her habeas corpus petition was upheld. View "Ellison v. USA" on Justia Law

The case involves James Peperno, Jr., who was found guilty by a jury of nine counts of conspiracy to commit bribery and wire fraud, among other related charges. Peperno devised a scheme to solicit bribes from Walter Stocki, who was involved in zoning litigation with the borough of Old Forge, Pennsylvania. Peperno, along with Robert Semenza, Jr., the Old Forge Borough Council President, planned to influence the litigation in Stocki's favor in exchange for bribes. Peperno initially approached Stocki in January 2019, asking for a $20,000 upfront payment and a monthly retainer. Stocki recorded their conversations and later contacted the FBI, which led to further recorded interactions and payments facilitated by the FBI.The United States District Court for the Middle District of Pennsylvania presided over the case. At trial, Peperno was found guilty on all counts except for two counts of money laundering. The Presentence Report (PSR) recommended sentencing enhancements for multiple bribes and for the total value of the bribes exceeding $15,000. Peperno objected to these enhancements, but the District Court overruled his objections, finding the recommendations supported by the evidence. The court sentenced Peperno to 72 months’ imprisonment, considering his intent and financial motivations.The United States Court of Appeals for the Third Circuit reviewed the case. Peperno appealed, arguing that the District Court erred in denying his request for a jury instruction on entrapment and in applying the sentencing enhancements. The Third Circuit held that the District Court correctly denied the entrapment instruction, as Peperno failed to show government inducement or lack of predisposition. The court also upheld the sentencing enhancements, agreeing that the evidence supported the finding of multiple bribes and that the total value of the bribes exceeded $15,000. The Third Circuit affirmed the District Court’s judgment of sentence. View "USA v. Peperno" on Justia Law

In 2018, Kousisis and Alpha Painting were convicted of conspiracy to commit wire fraud, 18 U.S.C. 1349, and three counts of wire fraud, 18 U.S.C. 1343. The charges arose from false documents filed concerning “disadvantaged business enterprise” status in transportation construction projects for which the U.S. Department of Transportation provided funds through the Federal Highway Administration to the Pennsylvania Department of Transportation. The district court imposed a 20-point sentencing enhancement under U.S.S.G. 2B1.1(b)(1), which corresponds to a loss of $9.50 million-$25 million, noting that the actual loss to the government was not measurable at the time of sentencing and concluding that Alpha’s “ill-gotten profits” represented an appropriate measure of loss.The Third Circuit affirmed the convictions. The defendants secured PennDOT’s money using false pretenses and the value PennDOT received from the partial performance of those painting and repair services is no defense to criminal prosecution for fraud. The court vacated the calculation of the amount of loss for sentencing purposes, noting the extreme complexity of the case. The victim’s loss must have been an objective of the fraudulent scheme; it is insufficient if that loss is merely an incidental byproduct of the scheme. The court separately vacated a forfeiture order of the entire profit amount on the contracts. View "United States v. Alpha Painting & Construction Co., Inc." on Justia Law

Titus’s solo medical practice, in its last 13 months, earned $1.1 million by distributing more than 20,000 prescriptions for Schedule II drugs. Titus often did only cursory physical examinations before prescribing opioids. He kept prescribing drugs despite signs that his patients were diverting or abusing them. At least two of Titus’s patients overdosed. Other doctors filed professional complaints. Titus closed his practice. Federal agents raided the homes of Titus and two of his employees and found thousands of patient files. Titus was indicted on 14 counts of unlawfully dispensing and distributing controlled substances (based on 14 prescriptions) and maintaining drug-involved premises, 21 U.S.C. 841(a)(1), (b)(1)(C), 856(a)(1).The government's statistician, using the Prescription Monitoring Program, identified 1,142 patients for whom Titus had prescribed controlled drugs, drew a random sample of 300 patients, and extrapolated to conclude that Titus had provided 29,323 controlled substance prescriptions to 948 patients with at least one inconsistent drug test and 1,552 such prescriptions to 352 patients he had already discharged from his practice. The government’s medical expert reviewed 24 of those files and determined that Titus had written illegal prescriptions for 18 of the patients.The district court held Titus responsible for at least 30,000 kilos, citing “general trial evidence” and extrapolating from the 24-file sample. The Third Circuit affirmed Titus’s convictions but vacated his 240-month sentence. The government failed to prove that extrapolating from a small sample satisfied its burden to prove the drug quantity by a preponderance of the evidence. View "United States v. Titus" on Justia Law

Porat, the Dean of the Fox School of Business at Temple University, was “almost obsessed with rankings.” To manipulate Fox’s U.S. New and World Report rankings, he submitted false information about students taking the Graduate Management Admission Test (GMAT), offers of admission, student debt, and average undergraduate GPA. Partly because of these deceptions, With Porat’s knowledge and involvement, Fox aggressively marketed its false high rankings. At trial, former students testified that they chose Fox because of its rankings or that they believed employers hire students from schools with the best “brand” and that Fox’s high rankings would help them “compete in the marketplace.” The government estimated that Fox gained nearly $40 million in tuition from the additional students who enrolled during 2014–2018. In 2018, Porat’s scheme was exposed. Fox administrators disclosed the false GMAT data to U.S. News, which announced Fox’s “misreported data.” As Fox’s rankings fell, its enrollment fell.The Third Circuit affirmed Porat’s convictions for conspiracy to commit wire fraud, 18 U.S.C. 371, and wire fraud, section 1343. The government proved by sufficient evidence that he sought to deprive his victims of money, that he sought to personally obtain money, or that the party he deceived was the same party he defrauded of money (“convergence” View "United States v. Porat" on Justia Law

Vepuri is the de facto director of KVK-Tech, a generic drug manufacturer. He employed Panchal as its director of quality assurance. KVK-Tech manufactured and sold Hydroxyzine, a prescription generic drug used to treat anxiety and tension. The government alleges that Vepuri, Panchal, and KVK-Tech sourced active ingredient for the Hydroxyzine from a facility (DRL) that was not included in the approvals that they obtained from the FDA and that they misled the FDA about their practices.An indictment charged all three defendants with conspiracy to defraud and to commit offenses against the United States and charged KVK-Tech with an additional count of mail fraud. The district court dismissed the portion of the conspiracy charge that alleges that the three conspired to violate the Food, Drug, and Cosmetic Act (FDCA), which prohibits introducing a “new drug” into interstate commerce unless an FDA approval “is effective with respect to such drug,” 21 U.S.C. 355(a).The Third Circuit affirmed, rejecting an argument that a deviation from the approved drug application means that the approval is no longer effective. The approval ceases being effective only when it has been withdrawn or suspended. The indictment does not include any allegations that the KVK-Tech Hydroxyzine manufactured with active ingredients from DRL had a different composition or labeling than the KVK-Tech Hydroxyzine with the effective approval. View "United States v. Vepuri" on Justia Law

For 15 years, Charles ran 26 payday-lending companies, violating state criminal laws against usury, charging fees roughly equal to 780% interest per year. The companies grossed nearly half a billion dollars. Charles was convicted of 17 counts, including two for RICO conspiracy. He was sentenced to 14 years in prison, fined $2.5 million, and had to forfeit $64 million in illicit gains from the RICO conspiracy. Charles had already given some of the forfeited property to his daughter Linda. After the forfeiture orders, Linda filed ancillary claims to recover her interest in the assets.The Third Circuit affirmed the denial of her claims. For a RICO conviction, the defendant “shall forfeit” any interest in or proceeds from the conspiracy, 18 U.S.C. 1963(a). Third parties may neither intervene in that forfeiture proceeding nor bring separate suits to assert their interests. Any person, other than the defendant, asserting a legal interest in the forfeited property may bring an ancillary claim; the court can amend the forfeiture order if that party shows that she either was a bona fide purchaser for value or has an interest in the forfeited property that was vested or superior at the time of the crime. The third party cannot “relitigate” the underlying forfeiture order. View "United States v. Hallinan" on Justia Law

Jumper, a securities broker-dealer, arranged financing on behalf of private investors for the purchase of a Pennsylvania fire-brick manufacturer. Jumper fraudulently obtained authority to transfer the company’s pension plan assets by forging the majority stakeholder’s signature on several documents. Between 2007-2016, Jumper transferred $5.7 million from the pension plan to accounts he controlled.The SEC filed a civil complaint against Jumper for securities fraud in the Western District of Tennessee. The Department of Justice filed criminal charges against Jumper in the Middle District of Pennsylvania. The Tennessee court entered a default judgment for the SEC and ordered Jumper to disgorge $5.7 million and to pay prejudgment interest of $726,758.79. In Pennsylvania, Jumper pleaded guilty to wire fraud and agreed to make full restitution; the parties stipulated a loss of $1.5-$3.5 million.The district court considered Jumper’s request for a downward departure based on medical issues, discussed the relevant 18 U.S.C. 3553(a) factors, and denied Jumper’s requests, explaining, the Bureau of Prisons (BOP) is equipped to provide consistent, adequate medical care. The court sentenced Jumper to 78 months’ incarceration, at the bottom of the Guidelines range of 78–97 months, and ordered him to pay $2,426,550 in restitution. The Third Circuit affirmed, rejecting arguments that the sentence violated the Double Jeopardy Clause and principles of collateral estoppel and that the court improperly concluded that the BOP could treat his medical issues. View "United States v. Jumper" on Justia Law

Upshur and Thompson operated a trust; people wired fees to Upshur and allowed the defendants to file tax forms representing that the Trust had withheld income tax on their behalf, hopefully yielding sizable refunds. The defendants themselves also participated. Though this scheme was largely unsuccessful, the IRS issued one $1.5 million refund but, realizing, its mistake, froze the payment. In another scheme, they made large fraudulent tax overpayments, hoping to generate refunds. This scheme apparently did not generate any payments from the IRS, but the two schemes, together, resulted in over $325 million in fraudulent tax claims.Upshur was convicted of conspiracy to defraud the United States and eight counts of aiding and assisting in the preparation of false tax returns, 18 U.S.C. 371, 26 U.S.C. 7206(2). The court recognized there was no actual loss to the U.S. Treasury, and calculated Upshur’s base offense level under U.S.S.G. 2T1.4 using the intended-loss figure of $325 million, for a Guidelines range of 324-348 months. The Third Circuit affirmed his 84-month sentence. The court acknowledged its 2022 “Banks” holding that for theft offenses, absent Guideline text extending “loss” to intended loss, U.S.S.G. 2B1.1’s loss table reached only actual loss. However. the texts of sections 2T1.1 and 2T1.4, applicable to tax fraud, indicated that 2T4.1’s loss table covers the loss the perpetrator intended. View "United States v. Upshur" on Justia Law

The Department of Transportation (DOT) provides funds for state transportation projects. States that receive federal transportation funds must set participation goals for disadvantaged business enterprises (DBEs)--for-profit small businesses “at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged” and “[w]hose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it.” States certify businesses as DBEs.The defendants were convicted of conspiracy to commit wire fraud, 18 U.S.C. 1349, and wire fraud, section 1343, arising out of DOT-financed contracts for work in Philadelphia that included DBE requirements. The Defendants' bids committed to working on the projects with Markias, a company that had prequalified as a DBE. During the performance of their contracts, the Defendants submitted false documentation regarding Markias’ role; PennDOT awarded the Defendants DBE credits and paid them based on their asserted compliance with the DBE requirements. Markias did not do any work on the projects or supply any of the materials. The Defendants arranged for the actual suppliers to send their invoices to Markias, which then issued its own invoices, adding a 2.25% fee.The Third Circuit affirmed the convictions but vacated the forfeiture order and loss calculation. The court acknowledged the complex nature of this fraud in this and commended the attempt to determine the amount of loss for sentencing purposes, and the amount to be forfeited. View "United States v. Kousisis" on Justia Law