A former Boston-area stripper who entertained under the name Princess Cheyenne in the infamous Combat Zone in the 1980s was convicted in Massachusetts state court on fraud and larceny charges for treating patients for seven years at a clinic while purporting to be a licensed psychologist with a Ph.D. According to a Boston Globe story (here), the defendant argued that she never claimed to any patients to be licensed as a psychologist, and she believed that she’d earned her degree even though she withdrew from the Massachusetts School of Professional Psychology without receiving a doctorate despite taking classes for five years. She eventually received a Ph.D. from a Dominica-based university through on-line courses that turned out to be bogus. The jury convicted her on 19 of the 25 counts charges. No word on what type of therapy she practiced on her patients, although I suspect that praciting for seven years means there were a number of successes during that time. (ph)
Category: Verdict
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Four former executives of biotech pharmaceutical manufacturer Serono S.A. were acquitted on charges that they sought to bribe doctors to prescribe the company’s leading medicine, Serostim, as part of a program to pump up sales. The four defendants were charged in a federal indictment in Boston in April 2005 with violating the anti-kickback statute for allegedly offering doctors an all-expense-paid trip to Cannes, France, for a medical conference in exchange for prescribing the human growth hormone that is used to treat AIDS-wasting. According to an AP story (here), the jury was out less than three hours before it returned the not guilty verdicts on all counts, after a two-and-one-half week trial. (ph)
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Newsday (AP) reports that an Atlanta lawyer was convicted in a "pump and dump" securities case following a trial in which he represented himself.
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Investment banker Richard Josephberg was convicted of 21 counts of tax evasion, conspiracy, and health care fraud for his failure to pay taxes owed since 1977. In the mid-1980s, the IRS determined that Josephberg owed over $1.5 million in taxes from the illegal tax shelter scheme his firm sold, and over the next fifteen years he took various measures to avoid paying the taxes, including putting assets into accounts in the names of his children, one of whom was an infant at the time. The jury also convicted Josephberg of failing to file his taxes for a three-year period and conspiracy. Interestingly, one tax evasion count alleged that Josephberg paid his housekeeper/nanny in cash to avoid filing the required tax reports and paying FICA and social security taxes for her. This is one of the few times the failure to pay the "nanny tax" — made famous in 1993 when a nominee for Attorney General was tripped up on the same issue — has been the basis for a criminal charge. The last count, which seems to be the icing on the cake, accused Josephberg of lying to his investment firm’s health insurer that his wife was an employee of the company and therefore covered by the health plan. Anything to avoid a co-payment, I guess. A press release issued by the U.S. Attorney’s Office for the Southern District of New York (here) discusses the conviction, and the indictment is below. (ph)
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Former Qwest CEO Joseph Nacchio was convicted on 19 counts of insider trading and acquitted on 23 other counts by a jury in Denver, Colorado. According to a report from the Rocky Mountain News (here), the acquittals came on the counts during the earlier part of the five-month period charged in the indictment, and the convictions were for the later transactions, totaling $52 million in sales. Under the Federal Sentencing Guidelines in effect for 2001, that amount of gain would result in a sentence of 57-71 months, but it could increase if the district court were to add any enhancements for abuse of a position of trust or more than minimal planning, which could take the range up to 8-10 years. Of course, the Sentencing Guidelines are no longer mandatory, but judges frequently use them as the starting point for the determination of an appropriate sentence, and they give a good idea of the general range for a likely prison sentence.
In light of the defense’s decision to go with a scaled-down presentation and not deal with the whole "national security" information that was only available to Nacchio, a natural question will be whether the defense was over-confident that the government had not established its case. Of course, the decision not to call Nacchio to testify will be second-guessed, but it is always difficult to say whether that would have made a difference, and if he had come across poorly, he could well have been convicted on all 42 counts and even faced an obstuction of justice enhancement to the sentence. (ph)
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Two former executives of Suprema Specialties, Inc., a publicly-traded specialty cheese company in New Jersey, were found guilty of 38 counts of conspiracy, bank fraud, and securities fraud related to fictional revenues at the company, which collapsed in 2002. Mark Cocchiola, a founder and former CEO of the company, and Steve Venechanos, its former CFO, were found guilty after the jury initially told the judge they were deadlocked, but then returned for more deliberations and returned the guilty verdicts on all counts. According to a press release issued by the U.S. Attorney’s Office (here): "The government presented evidence at trial that between July 2000 and January 2002, Suprema reported approximately $400 million in sales to its six biggest customers, which accounted for over half of its total reported sales for that period. The government’s evidence showed that over 99 percent of that $400 million in sales were entirely fictitious, with no product actually having been sold or shipped." A story in the Newark Star-Ledger (here) notes that the defendants used the "Richard Scrushy" defense at trial, that they did not know anything about the fraud and were lied to by various subordinates and customers who entered guilty pleas and cooperated with the government. While that defense worked for Scrushy, it was less successful for Cocchiola and Venechanos, who maintain their innocence and will appeal. (ph)
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A Texas jury found lawyer Ted Roberts guilty of two counts of theft and one count of a scheme to commit theft for threatening to file law suits against two men who had affairs with his wife. The evidence at trial was that Roberts told the men he would give some of the money they paid to avoid litigation to a children’s charity he founded, but then he took money from the charity. Roberts’ lawyer said he will pursue an appeal of the convictions, and the jury returned not guilty verdicts for threats Roberts made against two other men for similar conduct. Roberts’ wife, who is also an attorney, is facing charges for the threats that will be tried later. A Texas Lawyer article (here) discusses the verdict. (ph)
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A jury in the Northern District of Georgia returned guilty verdicts against ten defendants accused of a mortgage fraud scheme that involved 50 houses and 250 condominiums in the Atlanta area. The lead defendant, Phillip Hill, operated through his company, Pinnacle Development Property, in a series of transactions involving inflated appraisals and straw borrowers that led to charges of conspiracy, mail and wire fraud, and money laundering. According to a press release issued by the U.S. Attorney’s Office (here):
Each property was sold at an inflated price to a “straw purchaser” who applied for a mortgage loan based upon the inflated price. Such a fraudulent transaction is called a mortgage “flip.” The straw purchasers who participated in these mortgage flips were paid a kick-back out of the excess loan proceeds for the use of their name and credit. The victim-lenders granted the loans based upon numerous false representations and documents regarding the credit qualifications of the straw purchaser, as well as false representations that the straw purchaser had paid a down payment, would reside in the home, and would be responsible for the loan payment. In addition, the lenders were induced to make the loans based on fraudulently inflated appraisals. Some of the properties were “flipped” more than one time.
The nine other defendants were released on bail while they await sentencing, but the court ordered Hill to be held because he posed a flight risk due to the lengthy sentence he faces from a scheme that caused $41 million in losses. Two co-defendants were acquitted at the close of the evidence, and two more await trial. An Atlanta Journal-Constitution article (here) discusses the convictions. (ph)
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I. Lewis "Scooter" Libby was convicted of 4 of 5 counts. After 10 days of deliberation, an 11 person jury returned with convictions of obstruction of justice, false statements and perjury. Libby was found not guilty of one count of false statements. Some thoughts:
1. This is clearly a victory for the CIA. The government will prosecute individuals because of a leak of classified information, no matter how high up the individual is within the administration. (Thanks to the commenter below — Libby was not prosecuting for leaking classified information, and no one was actually charged with leaking classified information. But it does show the government was willing to investigate based upon the leaking of information).
2. The investigation and prosecution of crimes needs to be non-political so that prosecutions such as this can continue. The recent "firings" of U.S. Attorneys causes some concern here.
3. Sentencing is set for June 5th. Obstruction of Justice comes under 2J1.2 of the US Sentencing Guidelines and has a base level of 14. Perjury is under 2J1.3 and also has a base level of 14. Check out Professor Doug Berman’s Sentencing Blog for some of the forthcoming sentencing issues. I keep wondering if the prosecution might say that Libby had a "special skill" and try to increase the sentence for this – 3B1.3 states that "[i]f the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense…"
4. Martha Stewart now has company in the obstruction of justice club.
5. Obviously he was allowed to be free pending the sentencing. Many defendants are not given this opportunity, but rather are incarcerated immediately upon conviction. Clearly, people do not consider Scooter Libby as a threat that he needs to be incarcerated immediately.
6. President Bush should be pleased that this prosecution moved slowly and did not occur prior to his re-election.
7. Did the executive have an "effective program" to keep crimes from occurring within its midst? Did they operate with "due diligence" to make certain that confidential information was kept secret? If these rules apply to organizations under a respondeat superior rule, should they also apply to the executive?
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Libby – Guilty on 4 or 5 counts. More to follow. Indictment is here.
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MattBray.net 