The ugly brawl at the Pistons-Pacers game in 2004 has triggered an interesting situation in which the attorney for the fan accused of throwing a chair into a large group that included Pacers players will be called to testify at his (now former) client’s trial. Kenneth Karasick is on the prosecutor’s witness list because, according to the police, when he was viewing a videotape of the person who threw the chair, he said, "That’s my boy." Karasick denies having said any such thing, stating, "I’ll be a hostile witness . . . I’m not going to testify to something I didn’t say." The Michigan Rules of Professional Conduct, like the rules in virtually every other state, prohibit an attorney from being a witness at a client’s trial (MRPC 3.7), so the client will have to obtain new counsel. An article in the Detroit News (here) discusses the prosecution of the various fans and players, including a number of motions that have been filed in the case. (ph)
Category: Prosecutions
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Jurist alerts us that "US Indicts Former Halliburton Subsidiary Employee for Fraud."
So what’s it all about?
Well, it seems that "Assistant Attorney General Christopher A. Wray of the Criminal Division and U.S. Attorney Jan Paul Miller of the Central District of Illinois announced today that two men," one a former employee of "Kellogg, Brown & Root (KBR)" and the other a "managing partner of a Kuwaiti business, LaNouvelle General Trading and Contracting Company – have been indicted on charges of devising a scheme to defraud the United States of more than $3.5 million related to the awarding of a subcontract to LaNouvelle to supply fuel tankers for military operations in Kuwait." The charges are for "major fraud against the United States and six counts of wire fraud."
The government press release provides more details here. For more information on KBR, see the website: www.halliburton.com
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Bernie Ebbers offered the "honest-but-ignorant CEO" defense, and the jury rejected it. Ken Lay, former CEO of Enron, has advanced a similar position, asserting his innocence because he did not know about the complex financial chicanery at the company (check his personal website at www.kenlayinfo.com). An interesting post at TalkLeft (here) notes that while the key witnesses in both cases are former CFOs (Scott Sullivan of Worldcom and Andy Fastow of Enron) who have agreed to cooperate with the government in exchange for lower sentences, Fastow may have more credibility problems. Part of Fastow’s deal included delaying his ten-year sentence until his wife could complete her sentence for a tax violation related to Enron, giving him a powerful incentive to seek the best deal for himself by incriminating others. Of course, a ten-year sentence is substantial, and may bolster the government’s contention that Fastow is truthful because he did not receive a "sweetheart" deal.
Lay’s "honest-but-ignorant CEO" defense may be stronger than Ebbers’ because Lay was less of a hands-on manager, unlike the Ebbers portrayed to the jury as a micromanager who had tap water put into the company’s water coolers to save money. If nothing else, Lay went first-cabin at Enron, and the company did not scrimp on perks. Lay has a more significant problem, however, arising from his stock sales, including a number of transactions during 2001 — as the company was collapsing — in which he sold shares back to Enron to repay a $77 million line of credit from the company. The SEC’s civil complaint (here) summarizes the transactions:
From January 25, 2001 to November 27, 2001, Lay took advances on his line of credit in the total amount of $77,525,000. Thereafter, despite having other assets at his disposal, Lay repaid balances on the line of credit by selling $70,104,762 worth of Enron stock to the company twenty times, at prices he knew did not reflect accurately Enron’s true financial condition. For example, after learning of Enron’s undisclosed plan to hide over $500 million in EES losses in ENA, Lay sold 1,086,571 shares of Enron common stock back to the company, in 11 transactions, for a total of $34,081,558. Following Skilling’s resignation on August 14, 2001, at a point when Lay was learning more about Enron’s deteriorating financial condition, Lay sold 918,104 shares of Enron common stock back to the company, in five transactions, totaling $26,066,474. As Lay learned more negative information following Enron’s third quarter earnings release on October 16, 2001, Lay sold 362,051 shares of Enron stock back to the company, in four transactions, totaling $6,050,232.
While Ebbers never sold his stock, Lay engaged in a number of transactions in Enron shares that were not publicly disclosed until after it filed for bankruptcy. The focus of the government case is likely to be on the period from Aug. 14, 2001, when Jeff Skilling resigned as CEO and Lay assumed that position again, until the company’s collapse in November 2001. Rather than link Lay to the accounting, which is far more complex than the fraud at WorldCom and more susceptible to a claim of ignorance, the government will use Lay’s knowledge of the company’s burgeoning problems during the last few months and his stock transactions to overcome a claim of ignorance. On these issues there is more of a paper trail, including a number of public statements and private meetings which Lay attended. Fastow remains a key witness, but perhaps more for Skilling and Richard Causey, Enron’s former chief accounting officer, than for Lay. (ph)
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Orlando (FL) Mayor Buddy Dyer, Circuit Judge Alan Apte, and two campaign workers were indicted by a grand jury in Florida for "providing pecuniary gain for absentee ballot possession or collection" in violation of a state law prohibiting such conduct (indictment here). The indictment alleges that Dyer and Apte paid campaign workers to pick up absentee ballots and have them delivered to be counted during the 2004 election. Allegations of fraud in the 2004 mayoral race surfaced, and Dyer avoided a run-off election by only 234 votes. His main opponent in that election claims that there was widespread fraud related to the collection of absentee ballots from neighborhoods that favored Dyer and Apte. Florida Governor Jeb Bush suspended Dyer from office after the indictment, and a special election will be held. Dyer and Apte have claimed that the charges are politically motived because the special prosecutor bringing the charges against them is a Republican and they are Democrats.
A disputed election in Florida — that’s novel, isn’t it? An Orlando Sentinel story here discusses the charges.
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As discussed in a previous post (here) about a number of arrests of public officials in Monmouth County, New Jersey, charges against three additional defendants for money laundering were filed on March 10 as part of a widening crackdown on public corruption resulting from an extensive undercover FBI operation. A press release issued by the U.S. Attorney’s Office details charges against the defendants:
Criminal complaints were unsealed today charging a Monmouth County truck and equipment contractor, a transportation service owner and a Far Hills councilman with laundering large sums of cash in exchange for kickbacks from undercover agents in an FBI corruption investigation, U.S. Attorney Christopher J. Christie announced.
One of the complaints charges Stephen Appolonia, 52, of Colts Neck, the co-owner of International Trucks of Central Jersey, based in Howell and Hillside. The company sells International-brand trucks and other equipment to Monmouth County and various municipalities in Monmouth and elsewhere.
The same complaint charges Far Hills Councilman and police commissioner Thomas A. Greenwald, 52, a friend of Appolonia whom Appolonia introduced to undercover agents when Greenwald also wanted to participate in the money-laundering scheme, according to the criminal complaint. Greenwald and Appolonia ultimately laundered more than $350,000, according to the criminal complaint.
The indictment quotes the third defendant as describing his limousine business as "the greatest washing machine in the world" — that may be tough to explain to a jury. The criminal complaints filed in the case are here and here. (ph)
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Everyone reads reports about surveys and political polls as if they were gospel, but what if the pollster is taking liberties with the data? An indictment returned in the District of Connecticut presents that very scenario involving DataUSA Inc . (now called ViewPointUSA Inc.), which has been charged along with its owner (Tracy Costin) and a manger (Darryl Hylton) with conspiracy and wire fraud for providing political and business clients with falsified data. The indictment alleges that employees were told to speak with cats and dogs for information. The company’s website (www.datausainc.com) has the following statement: "DataUSA upheld the highest standards in data collection as demonstrated in the excellence of our data. DataUSA’s predictions of voting behavior and consumer behavior routinely reflected to be within 1% to 2% of actual behavior. We are proud of the quality data collected and want to thank you for teaming with DataUSA and for your support over the years."
A press release by the U.S. Attorney described the allegations:
According to the Indictment, DATAUSA INC. (“DataUSA”) conducts surveys and political polls for numerous clients throughout the United States. The surveys or polls are conducted through the use of computers and telephones. COSTIN, the owner and director of operations for DataUSA, was charged with conspiracy to engage and engaging in a wire fraud scheme to defraud clients of DataUSA by falsifying and fabricating survey results. According to the Indictment, both COSTIN and HYLTON, a DataUSA manager, and others not named in the indictment, engaged in a scheme to defraud by unilaterally instructing DataUSA employees to alter survey data and to fabricate surveys and otherwise falsify their contents in order to meet job quotas and deadlines. The Indictment charges the defendants with falsifying survey data by instructing employees to alter the gender and political affiliation of the interviewees. In addition, the Indictment also charges the defendants with falsifying survey results by altering data on survey responses originally taken by DataUSA employees after the surveys were completed.
Maybe some of the pollsters who predicted a Kerry victory finally have someone else to blame — dogs are notoriously liberal. (ph)
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It looks like the government has not stopped with Martha Stewart and Peter Bacanovic when it comes to indictments related to ImClone. CNN reports here how two individuals have been indicted on securities fraud and conspiracy to commit securities fraud for allegedly selling some ImClone stock after receiving a tip from Waksal. The criminal complaint can be found here. The SEC also brought a civil action pertaining to this matter. According to the SEC Complaint, discussions were had in 9 telephone calls between the hours of 5:59 A.M. and 9:08 A.M. on December 27, 2001.
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The government is proceeding with another health care fraud case. This time it is the USA in Florida announcing the filing of charges. And as with so many white collar charges being brought recently, the latest prosecution tacks on charges of money laundering.
Using 18 U.S.C. section 1347, a relatively new health care fraud statute, USA Marcos Daniel Jimenez announced an indictment charging "conspiracy to commit health care fraud and to pay kickbacks," 19 counts of health care fraud, a conspiracy to commit money laundering and 11 counts of money laundering. The indictment also has a forfeiture claim, in the amount of more than 10 million dollars.
According to a press release issued by the USA of the Southern District of Florida, five individuals are accused in this case. The press release states in part that some are accused of paying:
"kickbacks to patient recruiters so that they would provide the defendants and their companies with Medicare beneficiaries to pose as patients, and to patients in order to obtain from those Medicare beneficiaries their names and identification numbers, along with prescriptions for Durable Medical Equipment (DME) and prescription drugs relating to them.
"Once they had patient information, the defendants completed Medicare required orthotic measurement forms for DME without an orthotist or orthotic fitter ever having measured a patient, forged the signatures of doctors on prescriptions for DME and prescription drugs, and created entirely fraudulent patient files, containing manufactured and forged documents. The defendants would share patients between the defendants’ two (2) companies, billing the shared patients during different Medicare billing periods, without the patients having been seen by any doctor, orthotist, or fitter, and without having been prescribed any DME or prescription drugs. Using the patients’ identification information and prescriptions, the defendants then submitted claims to Medicare for reimbursement for the cost of DME and prescription drugs, and received payments from Medicare.
"The defendants, as alleged, then laundered some of the proceeds of the fraud by paying someone who they believed was a newspaper owner for bogus advertising that was never placed. The defendants would pay for the nonexistent advertising using a check from either or both of the DME companies and the newspaper owner would pay them back in laundered U.S. currency."
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Titan Corporation, whose merger with Lockheed Martin Corp. was scuttled in 2004 in part due to questionable foreign payments, agreed to enter a settlement with the SEC and plead guilty to one count of violating the Foreign Corrupt Practices Act related to more than $3.5 million of payments made to the President of Benin’s business advisor. The company agreed to disgorge profits approximately $12 million from the transactions obtained through the corrupt payments and to pay a criminal fine of $13 million. The SEC’s Litigation Release describes the conduct that violated the FCPA:
The Commission’s complaint alleges that, from 1999 to 2001, Titan paid more than $3.5 million to its agent in Benin, Africa, who was known at the time by Titan to be the President of Benin’s business advisor. Titan failed to conduct any meaningful due diligence into the background of its agent either before his retention or thereafter and also failed to ensure that the services alleged to be performed by the agent, and described in his invoices, were in fact provided to Titan. The complaint alleges, in 2001, at the direction of at least one former senior Titan officer based in the United States, Titan funneled approximately $2 million, via its agent in Benin, towards the election campaign of Benin’s then-incumbent President. The complaint also alleges that some of these funds were used to reimburse Titan’s agent for the purchase to T-shirts adorned with the President’s picture and instructions to vote for him in the upcoming election. According to the complaint, Titan made these payments to assist the company in its development of a telecommunications project in Benin and to obtain the Benin government’s consent to an increase in the percentage of Titan’s project management fees for that project. The complaint alleges that a former senior Titan officer directed that these payments be falsely invoiced by the agent as consulting services and that actual payment of the money be broken into smaller increments and spread out over time. The complaint does not allege that the then-incumbent President knew of the payments.
The SEC also issued a Section 21(a) Report of Investigation criticizing Titan for not properly disclosing the FCPA violations as part of the disclosure related to the proposed merger with Lockheed Martin.(ph)
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The former director of corporate communications for Gerber Scientific, Inc., Robert Goehring, was indicted in the Southern District of New York and charged in a civil complaint filed by the SEC in Connecticut with trading on material nonpublic information prior to its release by the company, resulting in gains and losses avoided of approximately $94,000. Goehring is also accused of tipping a close friend who traded in Gerber Scientific shares with a gain and loss avoided of approximately $11,000. The SEC Litigation Release states:
Between July 1998 and April 2000, Goehring traded in the Gerber stock nine times on the basis of material, nonpublic information he obtained in the course of his employment as Gerber’s director of corporate communications. Goehring enjoyed profits and avoided losses from these illicit trades of $94,016. In addition, Goehring tipped his close friend, Armund Ek, who was not employed at Gerber, with material, non-public information about Gerber on three occasions. Ek bought and sold Gerber stock based on these tips and had profits and avoided losses totaling $11,453 as a result of his trading.
Ek settled with the SEC (Litigation Release here), disgorging the $11,453 and paying a civil money penalty of a little less than $11,000; he was not charged in the criminal case. (ph)
MattBray.net 