White Collar Criminal Defense Lawyer Blog

Published on: July 18, 2011

Fine and forfeiture of Atlanta jewelry store’s entire inventory following money laundering and reporting conviction was not unconstitutional in U.S. v. Chaplin

The defendant business in U.S. v. Chaplin’s was a jewelry store in Atlanta from which the defendant, an employee, sold jewelry on a cash basis to persons he knew to be drug dealers. In one instance an undercover IRS agent posing as a narcotics trafficker purchased expensive jewelry in cash from the defendant at his store without completing a Form 8300. The undercover cash sales were structured to avoid individual payments in excess of $10,000, a transaction which required the defendant to file a report with the federal government (Form 8300) containing information about the such as buyer’s name and address. Chaplin’s, Inc., was indicted on money laundering counts and a count of failure to report, all arising out the undercover sale and the failure to file the Form 8300. Because the defendant committed the violations during the course of his employment at Chaplin’s, Chaplin’s Inc. was vicariously liable for his actions and charged by indictment.

The both counts of the indictment sought forfeiture of “any and all property involved in” the offenses including the jewelry store’s entire inventory. Following trial Chaplin’s was found guilty and the government moved to forfeit the inventory on the grounds that the inventory was “involved in” the money laundering and reporting offenses because it provided the defendant owner and employees and vicariously Chaplin’s with an “air of legitimacy.” The inventory totaled $1,877,262. The district court ordered forfeiture of the inventory, plus it imposed a $100,000 fines for two counts.

On appeal Chaplin’s challenged the monetary punishment as a violation of the 8th Amendment as the forfeiture was unconstitutionally excessive and grossly disproportional to the gravity of the offense.

In deciding gross-proportionality, the appellate court looked at three factors:

Whether the defendant falls into the class of persons against whom the criminal statute was principally directed;
Other penalties authorized by the legislature or the Sentencing Commission; and
The harm caused by the defendant.

Published on: July 17, 2011

Conviction for fraudulent billing Florida and California Medicaid programs for recycled blood-derivative medication was upheld in U.S. v. Bradley

by The Swartz Law Firm

Bradley and codefendants were convicted of conspiracy to commit wire fraud, mail fraud and money laundering along with other federal statutes. Bradley, the lead defendant, owned “Bio-Med Plus,” a pharmaceutical wholesaler that purchased and sold blood-derivatives (intravenous immune globulin) used to treat patients with HIV. The fraud Bradley committed was that he recruited physicians who dispensed blood-derivatives (IVIG) at AIDS clinics in the Miami area to fill their prescription at Bradley’s pharmacies for a kickback. Bradley purchased the unused portions (from patients who failed to appear at the clinic for the IVIG infusion) for one-third of the price that Florida Medicaid paid the pharmacies.

Bio-Med put those derivatives in their inventory and sold the unused derivatives to third party pharmacies in Florida and California for a substantial profit. The third party pharmacies unwittingly billed Medicaid for theses unused prescriptions. Bradley’s pharmacies filled prescriptions with the recycled derivatives and obtained reimbursement from the state’s Medicaid programs.

The Court of Appeals decided that a reasonable jury could find sufficient evidence that the defendants engaged in a scheme to defraud Florida Medicaid and Medi-Cal. It determined that Florida Medicaid and Medi-Cal never intended to reimburse for recycled blood derivatives that had been previously dispensed; that Bradley knew of these policies; that the programs would not knowingly pay for recycled blood derivatives previously dispensed; that the Bradley purchased recycled medications at discount prices from corrupt physicians with the intent to resell them for a significant profit; and that the defendants sold them off at full wholesale prices to pharmacies which dealt almost exclusively with Medicaid patients that bill the Medicaid program as if the blood derivative had never been recycled.
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Published on: June 26, 2011

Conviction of defendants in massive Atlanta area mortgage fraud upheld by Eleventh Circuit; U.S. v. Hill

by The Swartz Law Firm

The facts of U.S. v. Hill can be summarized as a scheme to obtain over 300 mortgage-backed loans for buyers who used the loans to purchase houses and condominiums from Hill and his associates for more than market value. Almost all of the loans went into default causing losses of 38 million to lenders and guarantors. Hill and his associates sold properties to straw buyers for substantially more than the cost or fair market value. Properties often went into default. In order to obtain the highest possible loans values (for these inflated prices) the lenders were given multitude of false statements: source of down payment, value of properties, income and employment of buyers, whether buyers would occupy properties, and whether any properties were being leased. Hill recruited people with good credit scores to serve as straw buyers of the properties. Often he made up employment of his straw buyers to convince lenders they could qualify for a loan, even to the extent of generating fake w-2s and pay stubs or answering the phone as the borrower’s employer. The final indictment had 187 counts ranging from conspiracy, wire fraud, mail fraud, false statements to a bank, money laundering.

Several issues were raised. Four defendants asked for their trials to be severed from their codefendants’ trials on various ground including mutually antagonistic defenses, prejudice from being tried with codefendants, or inability to pick a fair jury. All lost on this challenge. A Batson challenge to the jury selection was raised and the court found no evidence the prosecution used its peremptory strikes in a racially discriminatory manner.

Another issue raised was the use of the victim witnesses who were representatives of the victim lenders to testify about whether the misrepresentations in fraudulent loan applications would have had any effect on their decision to approve a loan. The objection was that these lay witnesses giving expert witness testimony were not qualified to give expert testimony. The court found it was properly treated as lay testimony for the bank representatives who testified about how the company does business as it was based on particularized knowledge gained in their position.

Published on: June 13, 2011

Substantial compliance is required for a sentence enhancement under 21 U.S.C. section 851(b)

by The Swartz Law Firm

In U.S. v. James the defendant appealed his conviction and sentence of 262 months for possession with intent to distribute less than 5 grams of cocaine. James was convicted following a trial on the lesser charges that he distributed more than 5 grams. There were two issues raised in this appeal. In the first issue the defendant claimed the judge reasonable doubt instruction misled the jury and lowered the government’s burden of proof by including a subjective standard of proof. In the second issue the defendant challenged the failure to comply with 21 U.S.C. §851(b) by failing to conduct a colloquy regarding his prior conviction.

With regard to the reasonable doubt instruction, the court disposed of this issue invoking the invited-error doctrine. The defendant not only offered the instruction and failed to object. It turns out the defendant submitted to the Court a definition for reasonable doubt from the former version of the Eleventh Circuit Pattern jury instruction and it was given to the jury by the court with out any objection from defendant.

The more significant issue here involved whether 851(b) required strict compliance. In U.S. v. Weaver the Eleventh Circuit held that the requirement of 851(a) was strict compliance. A defendant convicted of a drug offense faces an enhanced minimum mandatory sentence, having a prior drug conviction, if the government complies with 851(a) by filing the information setting forth the conviction. Compliance with 851(b) requires that at sentencing the court must “inquire” of the defendant as to “whether he affirms or denies that he has been previously been convicted as alleged in the information, and shall inform him that any challenge that is not made before sentencing is imposed may not thereafter be raised to attack the sentence.” Once the government complied with 851(a), the issue in this case was whether 851(b) also required strict compliance.

Published on: June 6, 2011

Curtailing cross examination of a prosecution’s star witness in an Escambia County corruption case was not a violation of the Sixth Amendment

by The Swartz Law Firm

Childers v. Floyd involved a federal habeas petition by Wyon Childers who claimed the Florida state courts violated his rights under the Sixth Amendment’s Confrontation clause. In this En Banc decision the court found that because there was an adjudication in the Florida state courts on the merits of the Sixth Amendment Constitutional claim, the federal courts must show deference to the state courts rulings, as required by the Antiterrorism and Effective Death Penalty Act (” AEDPA”). The En Banc court further found the state court’s decision on the merits was not contrary to, or and unreasonable application of, the Supreme Court Confrontation Clause precedent. Though this case was a habeas petition, it may have an effect on direct appeals raised in federal court involving the limitation on cross examination under the Sixth Amendment Confrontation Clause.

Childers, a county commissioner in Escambia County, Florida, was convicted in state court of bribery in connection with the corrupt purchase by Escambia County of the Pensacola Soccer Complex from owner, Joe Elliot. Childers was involved in paying another Escambia County Commissioner, Willie Junior, to secure Junior’s vote in favor of the sale to Elliot, who purportedly provided Childers and Junior with kickbacks when the county purchased the property. Prior to trial, the State Attorney struck a deal with Junior to plead to bribery charges in exchange for his cooperation. The State granted him immunity from prosecution for all other offenses and agreed to an 18 month sentenced. Eliot and Childers were tried separately. Junior testified at Eliot’s trial, implicating Eliot and Childers about their offering a bribe in exchange for his vote in favor of buying the complex, but Eliot was acquitted.

After the Eliot trial, Junior provided state investigators additional facts that implicated Childers more directly in the soccer stadium deal, but some of his additional facts conflicted with Junior’s prior statements. Hearing these new statements, the State tried to revoke Junior’s plea agreement by filing a “Notice of Revocation of Terms of Plea Agreement” in his case. The state court disallowed the revocation on the grounds that Junior’s statements were not under oath at trial or hearing and therefore not a technically a violation of the plea agreement. The State then proceeded with an amended information against Childers for the same offense, supported by statements provided Junior after Eliot’s acquittal. At Childers’ trial, hiss attorney tried to impeach Junior’s credibility with the fact that the State tried to withdraw his plea agreement and the fact of Eliot’s acquittal by linking them to Junior’s motivations for changing his testimony. The trial court prohibited his attorney from impeaching him with these facts.

Childers filed a federal habeas petition in federal court claiming a Confrontation Clause violation. It was denied by the district court. The appellate court panel reversed finding there was a Confrontation Clause violation with Judge Barkett in the majority and Judge Tjoflat dissenting. The En Banc court vacated the panel decision and found no Confrontation Clause violation, with Judge Tjoflat writing the opinion and Judge Barkett writing a dissent.

The En Banc court gave deference to the state court’s rulings prohibiting Chandler’s attorney from impeaching Junior with the Notice of Revocation of the Plea Agreement and the Eliot acquittal. It decided that the state court’s decision was not unreasonable in view of recent U.S. Supreme Court rulings on limitations by state courts of cross examination of witness bias. The three cases discussed were Davis v. Alaska, Delaware v. Van Arsdall, and Olden v. Kentucky. The En Banc court noted the following two “rules” from these cases.

First, the trial courts may not prohibit all questioning into a witness’ biases. As long as the state court permits some question about a witness’s bias, the state court satisfies the Confrontation Clause requirements. “In each of the precedential cases, the trial court barred the defense from informing the jury of the witness’s potential bias and how that might affect the witness’s testimony. The [Supreme Court], therefore, never had occasion to require trial courts to permit cross-examination on more than the existence of a bias.”
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Published on: May 29, 2011

When the prosecutor said “he” did he mean the Defendant or the blood of his victim?

by The Swartz Law Firm

Though Duke v. Allen does not involve a white collar offense, it is important because it touches on a person’s Fifth Amendment right to remain silent at trial. When an person exercises the right not to testify at trial, the prosecutor can not make any comment about it in closing argument. It is misconduct by a prosecutor to ask a jury cannot consider the defendant’s silence in any way in their deliberations.

Mark Duke was on trial in Alabama state court for the murder of his father and three other persons. In closing arguments the prosecutor summarized the prosecution’s theory. “He [the codefendant who testified for the state] told the truth, ladies and gentleman, and here is how we know it, there’s a witness that you heard from but he didn’t’ come in here and talk to you from the witness stand. After he shot, stabbed, and cut the throat of Randy Duke, he took Randy Duke’s blood with him throughout that house.”

The defendant’s attorney moved for a mistrial and added this comment: “Let the record reflect that the district attorney pointed straight at the defendant when he said that.” In his appeal to the Alabama appeals court, the defendant argued that the prosecutor violated federal and state law by commenting on the defendant’s decision not to testify at trial. The Alabama court disagreed.

Published on: May 27, 2011

Four Rothstein associates charged in Miami with conspiracy in connection with Ponzi scheme

by The Swartz Law Firm

On May 27, 2011, the U.S. Attorney Miami filed charges against four individuals in connection with the Scott Rothstein’s fraudulent Ponzie scheme. Rothstein has already pled guilty and sentenced to 50 years for operating the fraudulent operation from 2005 through November 2009, through his law firm, Rothstein, Rosenfeldt, and Adler, P.A. (RRA), in Ft. Lauderdale, Florida. Rothstein and others fraudulently obtained approximately $1.2 billion from investors through bogus investment and other schemes. Rothstein and co-conspirators used RRA to fraudulently induce investors to: (1) loan money to non-existent borrowers based upon promissory notes and requests for short-term bridge loans for business financing; and (2) invest funds based upon anticipated pay-outs from purported confidential civil settlement agreements. The four charged all worked for Rothstein’s firm.

The information filed against Howard Kusnick alleges that, while an attorney at RRA, Kusnick engaged in a scheme to defraud two clients of RRA by authoring a letter purporting to settle pending litigation in the clients’ favor. In fact, no such litigation had been instituted and no such settlement existed. Rather, the purpose of the letter was to lull the clients into believing that RRA was pursuing litigation on their behalf when, in fact, the clients’ funds had been used to pay off earlier investors and to further the investment fraud scheme.

In this aspect of Rothstein’s Ponzi scheme, Rothstein settled a lawsuit in favor of the defendant and against his client, without the clients’ knowledge, thereby obligating the clients to pay $500,000 to the defendant in the civil lawsuit. To perpetuate and conceal the fraud, defendant Rothstein and these co-conspirators created a false federal court order, purportedly signed by a U. S. District Judge, stating that the clients had won the lawsuit and were owed a judgment of approximately $23 million. The false court order also stated that the defendant in the civil suit had transferred the funds to the Cayman Islands to avoid paying the judgment. Rothstein and these co-conspirators falsely advised the clients that to recover those funds, the clients were required to post bonds. In this way, Rothstein caused the clients to wire transfer approximately $57 million to a trust account he controlled, purportedly to satisfy the bonds.

Published on: May 24, 2011

Federal Appellate Court in Atlanta returns defendant back to jail for remainder of 24 year sentence

by The Swartz Law Firm

In Gilbert v. U.S. the Eleventh Circuit Court of Appeals ruled en banc that the savings clause of 28 U.S.C. §2255 does not permit a federal prisoner to challenge his sentence through a habeas petition under 28 U.S.C. §2241 if he was otherwise barred by §2255 from filing second or successive motions. At the risk of becoming mired in the procedural history of the case, here is a short summary of what happened.

Convicted of a drug offense, Gilbert’s sentence was enhanced under Guidelines Section §4B1.1 because he was deemed a career offender for his convictions for crack sale and carrying a concealed weapon. On direct appeal he raised and lost on the issue that the gun possession was not a crime of violence (U.S. v. Gilbert) His petition for certiorari to the Supreme Court was denied and subsequently he lost his motion to vacate conviction under §2255 on the same grounds. Then the Supreme Court decided in Begay v. United States that the offense of driving under the influence was not violent felony within the definition of the Armed Career Criminal Statute, 18 U.S.C. §924(e). Following Begay, the Eleventh Circuit decided in U.S. v. Archer that carrying a concealed weapon was not a crime of violence under the §4B1.1 career offender enhancement.

The Eleventh Circuit effectively reversed the Gilbert decision in Archer. Understandably, Gilbert wanted his sentence reduced after Archer and he filed a second §2255 motion to be sentenced without the armed career enhancement. Unfortunately, he already raised his post conviction §2255 motion and the district court denied his second under §2255(h) which bars successive petitions. The Eleventh Circuit panel reversed the district court with a finding that the “savings clause” exception of §2255(h) applied and allowed for traditional habeas relief under §2241. The panel also found the “actual innocence” exception to §2255(h) applied because he had been enhanced for a nonexistent violent crime.

Published on: May 19, 2011

Court reversed Federal Conviction in Florida for attempting to help dispose of drug money; U.S. v. Friske

by The Swartz Law Firm

This is one of those rare cases where the court of appeals found a Rule 29 motion should have been granted because the facts were insufficient to support a conviction of the charges. In U.S. v Friske the defendant was charged with attempting to obstruct a forfeiture proceeding by attempting to dispose of money subject to a forfeiture proceeding in violation of 18 U.S.C. 1512(c)(2). The defendant was convicted following a trial. The court of appeals vacated the conviction and ruled there was insufficient evidence showing that he was guilty. The facts as presented at trial showed as follows. William Erickson had been indicted for drug conspiracy charges related to a marijuana grow operation. Erickson called Friske from jail and asked Fiske to travel to Erickson’s home to do a repair job. He told Friske the job required Friske to don a pair of gloves, get on his hands and knees under the pool deck.

Agents intercepted these jail calls to Friske and headed out to the property the day before Friske would get there After digging in the area describe by Erickson, they found $375,000 hidden in a pvc pipe buried under the pool decking. The next day, when the agents arrived they found Friske on the property wearing a pair of gloves, holding a flashlight, dirt on his chest and arms. After questioning and a search of his van revealed letters from Erickson asking him to find some things at Erickson’s house and take them back to Friske’s home. When confronted about digging around the pool deck, he claimed he was looking for wood rot. Later, on the phone with Erickson, Friske is recorded as saying the DEA agents had been on the property but Agents arrived while he was there. He said the agents did not “buy it” when he told the agents the pilings underneath the deck needed repair because he was fixing and securing the property for Erickson.

A conviction under 18 U.S.C. 1512(c)(2) requires the following:
• that there be n official proceeding taking place,
• the defendant’s conduct constituted a substantial step toward the commission of the crime,
• that the defendant acted with improper purpose and to engage in conduct knowingly and dishonestly with the specific intent to obstruct the forfeiture proceeding,
• the natural and probable effect of the conduct would be the interference with the administration of justice.
Wrestling with the requirement that Friske know that there was an official proceeding, the court agreed with other circuits in finding that the defendant “must have a relationship in time causation or logic with the judicial proceeding.”
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Published on: May 15, 2011

Muslim Imam in Miami arrested for giving financial aid to Pakistan Taliban.

by The Swartz Law Firm

On May 14, 2011, FBI agents in Miami arrested Hafiz Muhammad Ali Khan, 76 year-old Imam, on charges of conspiracy along with four other family members to give financial aid to terrorist activities of the Taliban rebels in Pakistan. The indictment alleges specifically that they sent $50,000 to insurgents for guns, training, schools and other resources to carry out violent activities. According to the federal charges the government tapped phone conversations of Khan and others over the course of a two year period. In one of those conversations it is alleged that Hafiz Khan spoke with a son about calling for an attack on the Pakistani Assembly. In another conversation the government claims Khan talked about Pakistani insurgents and praised to the Taliban in Afghanistan for conducting a raid on U.S. soldiers. The United States Attorney in Miami announced that the evidence was based on the wiretapped conversations well as bank records of financial transactions by Khan to a bank account in Pakistan. The arrests were first reported by Jay Weaver of the Miami Herald.

Family members of Mr. Khan announced that none of his family supports the Taliban. Others in the South Florida Muslim community were stunned by the news, and all echoed the same sentiments that these charges are out of character for Mr. Khan, a soft-spoken, sickly man. The Muslim Communities Association issued a statement condemning any act of support for terrorism while emphasizing that those arrested are presumed innocent until proven guilty.

This indictment is the first terrorism case in the South Florida Federal court since the Bush Administrations prosecution against Jose Padilla, one time labeled an enemy combatant, conviction followed a five month trial in Miami. The indictment charging Khan is founded on the same material support statute as the Padilla case, which makes it a crime to supply money to groups overseas involved terrorist activities. Padilla and his co-defendants were charged with giving Padilla financial assistance and support in traveling to and attending an Al Qaeda training camp in Afghanistan. The Padilla case is still pending before the Federal Court of Appeals in Atlanta. Ken Swartz of the Swartz Law Firm represented Adham Hassoun, who was charged along with Jose Padilla.