Articles Posted in White Collar Crime

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Plaintiffs founded ChinaWhys, which assists foreign companies doing business in China with American anti-bribery regulations compliance. Plaintiffs allege that the GSK Defendants engaged in bribery in China, with the approval of Reilly, the CEO of GSK China. In 2011, a whistleblower sent Chinese regulators correspondence accusing GSK of bribery. Defendants tried to uncover the whistleblower’s identity. Plaintiffs met with Reilly. According to Plaintiffs, GSK China representatives stated they believed Shi, a GSK China employee who had been fired, was orchestrating a “smear campaign.” ChinaWhys agreed to investigate Shi under an agreement to be governed by Chinese law, with all disputes subject to arbitration in China. Plaintiffs were arrested, convicted, imprisoned, and deported from China. Reilly was convicted of bribing physicians and was also imprisoned and deported. The Chinese government fined GSK $492 million for its bribery practices; GSK entered a settlement agreement with the U.S. SEC. Plaintiffs sued under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961–1968, contending that their business was “destroyed and their prospective business ventures eviscerated” as a result of Defendants’ misconduct. RICO creates a private right of action for a plaintiff injured in his business or property as a result of prohibited conduct; for racketeering activity committed abroad, section 1964(c)’s private right of action requires that the plaintiff “allege and prove a domestic injury to its business or property.” The Third Circuit held that Plaintiffs did not plead sufficient facts to establish that they suffered a domestic injury under section 1964(c). View "Humphrey v. GlaxoSmithKline PLC" on Justia Law

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Before trial on a 77-count indictment that charged Appellants with operating a ticket-fixing scheme in the Philadelphia Traffic Court, the district court denied a motion to dismiss charges of conspiracy (18 U.S.C. 1349), mail fraud (18 U.S.C. 1341), and wire fraud (18 U.S.C. 1343). A private citizen and the Traffic Court administrator subsequently pleaded guilty to all counts, then appealed whether the indictment properly alleged mail fraud and wire fraud. Three Traffic Court Judges proceeded to a joint trial and were acquitted of fraud and conspiracy but convicted of perjury for statements they made before the Grand Jury. They disputed the sufficiency of the evidence, arguing that the prosecutor’s questions were vague and that their answers were literally true; claimed that the jury was prejudiced by evidence on the fraud and conspiracy counts; and argued that the court erred by ruling that certain evidence was inadmissible. The Third Circuit affirmed the convictions. The Indictment sufficiently alleged that the defendants engaged in a scheme to defraud the Commonwealth and the city of money in costs and fees; it explicitly states that the scheme deprived the city and the Commonwealth of money, and describes the object of the scheme as obviating judgments of guilt that imposed the fines and costs. View "United States v. Hird" on Justia Law

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Fattah, a prominent fixture in Philadelphia politics, financially overextended himself in both his personal life and his professional career during an ultimately unsuccessful run for mayor. Fattah received a substantial illicit loan to his mayoral campaign and used his political influence and personal connections to engage friends, employees, and others in an elaborate series of schemes aimed at preserving his political status by hiding the source of the illicit loan and its repayment. Fattah and his allies engaged in shady and, at times, illegal behavior, including the misuse of federal grant money and federal appropriations, the siphoning of money from nonprofit organizations to pay campaign debts, and the misappropriation of campaign funds to pay personal obligations. Based upon their actions, Fattah and four associates were charged in a 29-count indictment. Each was convicted on multiple counts. The Third Circuit affirmed in part, rejecting various challenges to evidentiary rulings, jury instructions, and the sufficiency of the evidence, but vacated certain convictions involving jury instructions concerning the meaning of the term “official act” as used in the bribery statute and the honest services fraud statute. In light of the Supreme Court’s 2016 “McDonnell” decision, released the week after the jury verdict, the instructions were incomplete and erroneous. View "United States v. Fattah" on Justia Law

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In 2015, former Virgin Islands Senator James was charged with wire fraud, 18 U.S.C. 1343, and federal programs embezzlement, 18 U.S.C. 666(a)(1)(A), stemming from his use of legislative funds to ostensibly obtain historical documents from Denmark related to the Fireburn, an 1878 St. Croix uprising. The indictment specified: obtaining cash advances from the Legislature but retaining a portion of those funds for his personal use; double-billing for expenses for which he had already received a cash advance; submitting invoices and receiving funds for translation work that was never done; and submitting invoices and receiving funds for translation work that was completed before his election to the Legislature. James, who argued that he was engaged in legislative fact-finding, moved to dismiss the indictment on legislative immunity grounds. The district court denied the motion, stating that James’ actions were not legislative acts worthy of statutory protection under the Organic Act of the Virgin Islands. The Third Circuit affirmed. Under 48 U.S.C. 1572(d) legislators are protected from being “held to answer before any tribunal other than the legislature for any speech or debate in the legislature." The conduct underlying the government’s allegations concerning James is clearly not legislative conduct protected by section 1572(d). View "United States v. James" on Justia Law

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In 2015, former Virgin Islands Senator James was charged with wire fraud, 18 U.S.C. 1343, and federal programs embezzlement, 18 U.S.C. 666(a)(1)(A), stemming from his use of legislative funds to ostensibly obtain historical documents from Denmark related to the Fireburn, an 1878 St. Croix uprising. The indictment specified: obtaining cash advances from the Legislature but retaining a portion of those funds for his personal use; double-billing for expenses for which he had already received a cash advance; submitting invoices and receiving funds for translation work that was never done; and submitting invoices and receiving funds for translation work that was completed before his election to the Legislature. James, who argued that he was engaged in legislative fact-finding, moved to dismiss the indictment on legislative immunity grounds. The district court denied the motion, stating that James’ actions were not legislative acts worthy of statutory protection under the Organic Act of the Virgin Islands. The Third Circuit affirmed. Under 48 U.S.C. 1572(d) legislators are protected from being “held to answer before any tribunal other than the legislature for any speech or debate in the legislature." The conduct underlying the government’s allegations concerning James is clearly not legislative conduct protected by section 1572(d). View "United States v. James" on Justia Law

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Metro, a managing clerk at a New York City law firm, engaged in a five-year scheme in which he disclosed material nonpublic information concerning corporate transactions to his friend Tamayo. Tamayo told his stockbroker, Eydelman, who made trades for Tamayo, himself, his family, his friends, and other clients. Metro did not hold the involved stocks himself and did not collect proceeds but relied on Tamayo to reinvest the proceeds from their unlawful trades in future insider trading. During the government’s investigation, Tamayo promptly admitted his role in the scheme and cooperated with the government. The insider trading based on Metro’s tips resulted in illicit gains of $5,673,682. The court attributed that entire sum to Metro in determining his 46-month sentence after Metro pled guilty to conspiracy to violate securities laws, 18 U.S.C. 371, and insider trading, 15 U.S.C. 78j(b) and 78ff. Metro denies being aware of Eydelman’s existence until one year after he relayed his last tip to Tamayo, and contends that he never intended any of the tips to be passed to a broker or any other third party. The Third Circuit vacated the sentence. The district court failed to make sufficient factual findings to support the attribution of the full $5.6 million to Metro and gave too broad a meaning to the phrase “acting in concert.” View "United States v. Metro" on Justia Law

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From 2006 through 2011, Poulson tricked homeowners facing foreclosure into selling him their homes and engaged in a multi-million-dollar Ponzi scheme that defrauded investors in those distressed properties. Poulson pleaded guilty to one count of mail fraud, 18 U.S.C. 1341. The district court calculated his total fraud to be $2,721,240.94; concluded that this fraud resulted in “substantial financial hardship” for more than 25 victims; and sentenced Poulson to 70 months’ imprisonment followed by three years of supervised release, with a condition prohibiting Poulson from working in the real estate industry for five years. The Third Circuit affirmed in part, upholding the court’s determination of the number of victims who suffered a “substantial financial hardship” under U.S.S.G 2B1.1. The court reasoned that the Guidelines give the court considerable discretion. The court vacated the imposition of a five-year occupational restriction on his three-year term of supervised release, the statutory maximum, and remanded for resentencing. View "United States v. Poulson" on Justia Law

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Ferriero was chairman of the Bergen County Democratic Organization (BCDO) from 1998 until he resigned in 2009. Ferriero took payments from a vendor (C3) that provided emergency notification systems for local governments in exchange for recommending to officials that their towns hire the firm. Ferriero’s corporation executed a contract, described as an “agreement . . . to provide governmental relations consulting services required in connection with marketing of a product known as C3 and any other related products or services.” The municipalities that bought the product were unaware that Ferriero stood to benefit financially. The Third Circuit affirmed Ferriero’s convictions, a forfeiture order, and sentence based on violations of the Travel Act, 18 U.S.C. 1952, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(c), and the federal wire fraud statute, 18 U.S.C. 1343. The evidence was sufficient to prove New Jersey bribery as a predicate act for his Travel Act and RICO convictions. There was sufficient evidence for a rational juror to conclude Ferriero participated in the conduct of the BCDO’s affairs by means of a pattern of bribery and to conclude that failure to disclose Ferriero’s C3 interest amounted to a materially false or fraudulent misrepresentation. View "United States v. Ferriero" on Justia Law

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Repak was the Executive Director of the Johnstown Redevelopment Authority (JRA), which receives federal and state funding. JRA’s Board of Directors awards contracts to remediate industrial proprieties and issues grants, relying on the Executive Director for recommendations. Repak solicited from JRA contractors, items such as concert tickets, sporting event tickets, and golf outings. One contractor testified, Repak “would sometimes . . . provide some innuendos like, ‘I’m reviewing some invoice here of yours.’” In 2009, JRA contractor EADS replaced the roof on Repak’s home at no cost to Repak and another JRA contractor performed excavating services at a gym owned by Repak’s son. Repak was convicted under the Hobbs Act, 18 U.S.C. 1951(a), for knowing obstruction, delay, or effect on commerce “by extortion” through the solicitation and receipt of goods and services, “which were not due him or his office, and to which he was not entitled, . . . in exchange for [his] official action and influence … to facilitate the award of [JRA] contracting work,” and of violations of the federal program bribery statute, 18 U.S.C. 666(a)(1)(B). The Third Circuit affirmed. While the district court’s Rule 404(b) analysis, was lacking, even under a proper Rule 404(b) analysis, the government’s other-acts evidence was admissible. View "United States v. Repak" on Justia Law

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Doe was president and “sole proprietor” of Company A, but a 2008 document purports to memorialize Doe’s sale of all shares to Company B for $10,000. Numerous filings and tax documents suggested that Doe maintained control and ownership of Company A after the transfer. Multiple individuals have sued Doe and his businesses in state courts. Doe and the companies were investigated by a federal grand jury. The government obtained access to Doe’s email. Doe filed an interlocutory appeal to prevent its disclosure. While the appeal was pending, the district court granted permission to present the email to the grand jury, finding that although the email was protected by the work product privilege, the crime-fraud exception applied; in 2016, the grand jury returned an indictment, charging conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act, conspiracy, mail fraud, wire fraud, and money laundering. The Third Circuit initially dismissed an interlocutory appeal, but, on rehearing, reversed, concluding that, while the grand jury investigation continues, it retains jurisdiction, and that the crime-fraud exception did not apply. The court stripped an attorney’s work product of confidentiality based on evidence suggesting only that the client had thought about using that product to facilitate fraud, not that the client had actually done so. An actual act to further the fraud is required before attorney work product loses its confidentiality. View "In re: Grand Jury Matter #3" on Justia Law