The New York Times has the story, with a link to the criminal complaint, here. U.S. Attorney Preet Bharara followed his longstanding tradition of holding a press conference in order to make inflammatory, prejudicial, and improper public comments about the case.
Tag: wire fraud
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Nancy and Lester Sadler ran pain clinics that sometimes serviced more than 100 patients a day–and that didn't even include the fake ones. They were convicted of several crimes and the Sixth Circuit affirmed all but one of the counts of conviction last week. Nancy Sadler's wire fraud conviction was vacated, however. According to the Court, "the government showed that Nancy lied to pharmaceutical distributors when she ordered pills for the clinic by using a fake name on her drug orders and by falsely telling the distributors that the drugs were being used to serve 'indigent' patients." But this did not "deprive" the distributors of their property, because Nancy paid full price. "[P]aying the going rate for a product does not square with the conventional understanding of 'deprive.'" The government argued that the distributors would not have sent the pills had Nancy told them the truth. The Sixth Circuit dubbed this a "right to accurate information" and noted that the federal mail and wire fraud statutes no longer cover this kind of intangible right in the post-McNally era. Congress' statutory fix of McNally only covers the intangible right of honest services, "which protects citizens from public-official corruption." Of course 18 U.S.C. Section 1346 does more than that, even after Skilling, as it also covers certain private deprivations of honest services. But the conduct at issue in Sadler did not involve Nancy's "honest services" to the pharmaceutical distributors. She provided no services to them–she simply fibbed, but paid full price. Here is the opinion in United States v. Nancy Sadler.
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Last week in United States v. Willena Stargell, the Ninth Circuit declared, in effect, "we are family with our sister circuits" in interpreting the federal wire fraud statute. Stargell, a tax preparer, was charged and convicted under 18 U.S.C. Section 1343 with wire fraud "affect[ing] a financial institution." Based on her filing of false tax returns, Stargell obtained Refund Anticipation Loans ("RALs") from financial institutions. Even though three of the four loans involved in Stargell's convictions did not result in a loss to any bank, the Ninth Circuit held that the statute was violated because, "[t]he increased risk of loss presented by fraudulent terms is sufficient to 'affect' a financial institution." The Ninth Circuit joined "our sister circuits in defining such term to include new or increased risk of loss to financial institutions." In fact, the only circuits the Ninth joined were the Seventh and Tenth. "The banks were affected because the risk of loss on the RALs was increased by the fraudulent nature of the related returns." The opinion takes a sledgehammer to the rule of lenity.
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The Tenth Circuit recently affirmed the convictions, but remanded the sentence of Howard O. Kieffer. Kieffer, who for several years was practicing criminal defense law, had a problem – he never went to law school and had no license to practice law. A court in the Eighth Circuit in 2010 upheld his convictions for mail fraud and making false statements. But he was also convicted in 2010 in Colorado for wire fraud and contempt of court. That decision was recently affirmed in the Tenth Circuit with a remand on sentencing here.
There is one aspect of this Tenth Circuit decision that raises eyebrows. The issue is what constitutes interstate wires for purposes of the wire fraud statute. This is a particularly important issue in these days of the WorldWideWeb. For example, in United States v. Phillips, 376 F. Supp2d 6 (D. Mass. 2005) the court rejected the government argument that “in order to satisfy the elements of this offense, it was not necessary to present evidence that the pertinent wire communications themselves actually crossed state lines, as long as the communications (whether interstate or intrastate) traveled via an ‘instrument of an integrated system of interstate commerce,’ such as the interstate phone system.” Even in the Tenth Circuit in United States v. Schaefer, 501 F.3d 1197 (10th Cir. 2007), the court previously held that one person’s use of the internet, “standing alone” was insufficient evidence that the item “traveled across state lines in interstate commerce.”
So it is surprising to read in Keiffer that the Tenth Circuit is now saying, "“[t]he presence of end users in different states, coupled with the very character of the internet, render this inference permissible even absent evidence that only one host server delivered web content in these two states.”
Clearly Keiffer's conduct was appalling, but the ramifications of the language in this decision could be huge. Could individuals from outside this country be charged with crimes against the United States merely because they put something on the web?
(esp)(hat tip to John Wesley Hall)
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In an otherwise unremarkable bank and mail fraud affirmance, the Fifth Circuit reminds us that losses cannot be included as relevant conduct unless they are bottomed on criminal and/or fraudulent behavior. The appellant in U.S. v. Bernegger (loss must be criminally derived to count as relevant conduct), obtained two grants of $250K each from the State of Mississippi, which secured a first lien on the underlying collateral. Appellant later pledged the same collateral to other entities, but there was literally no evidence indicating that the original grants were procured through fraud. Nevertheless, the probation officer included the grants in the PSR's loss calculation and the trial court accepted the figure. The Fifth Circut also reiterates that "bare assertions" in a PSR are not, standing alone, evidence. This particular error did not affect appellant's Guidelines range, but did result in a reduced restitution award. The panel consisted of Judges Wiener. Clement, and Elrod. Opinion by the Dutchman.
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For many, this week starts the first week of classes. So it seems appropriate to remind everyone that hi-tech grade changing schemes can land students with criminal convictions and prison time.
The Eleventh Circuit upheld the conviction and sentence of an undergraduate student at Florida A & M University (FAMU) who had received a sentence of 84 months and was appealing. (U.S. v. Barrington) This student, along with two co-defendants, "all undergraduate students at Florida A&M University ("FAMU"), were indicted and charged in a five count indictment with conspiracy to commit wire fraud using a protected computer in violation of 18 U.S.C. §§ 371 and 1349; fraud using a protected computer in violation of 18 U.S.C. §§1030(a)(4) and (c)(3)(A) and 2; and three counts of aggravated identity theft in violation of 18 U.S.C. §§ 1028A and 2." Two of the students "pleaded guilty pursuant to plea agreements, received substantial assistance departures pursuant to U.S.S.G. § 5K1.1, and were each sentenced to 22 months in prison and 3 year terms of supervised release."
In this case it started with using "blank grade change slips." But it then moved to installing "keylogger software on various University computers, including an office computer used by a Registrar employee and four terminals placed in the University's grand ballroom during registration." They captured the Registrar's usernames and passwords which allowed them access to the system so that they could change grades. They even went so far as to change "the residencies of several non-resident students to qualify them for in-state tuition." The court noted that an investigation "revealed that in excess of 650 unauthorized grade changes had been made, involving at least 90 students."
The 11th Circuit rejected the appealing defendant's legal error claims and also claims that the sentence was improper.
(esp)
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The 11th Circuit remanded a case, Cabrera, premised on Skilling, vacating all counts of the conviction. But it allowed the lower court to determine whether a retrial was possible or whether the Fifth Amendment prohibited a retrial. Obviously, on remand the court prohibited the retrial as it would violate the Fifth Amendment's double jeopardy provisions.
It is interesting to contrast the initial portion of this case with the cases of Conrad Black, Jeffrey Skilling, and former Governor Ryan. In the Cabrera case, the jury was instructed on honest services. It was not limited to acts of bribery or kickbacks. The jury limited their decision to the scheme to defraud being premised on an alleged defrauding of investors of the intangible right to honest services. The government admitted in their sentencing memo that the "jury had not convicted defendant of a scheme to defraud investors of money." But the government in the Cabrera case tried to use this acquitted conduct for sentencing.
Then came the Skilling decision and having stretched the statute beyond its limits, the government in the Cabrera case was caught in a bind. The Court admitted in Skilling that this "'flaw' [not limiting the statute to bribes and kickbacks] did not necessarily require reversal of the conviction because it could have been harmless error." And in Skilling, the case was sent back on remand for consideration, which the Fifth Circuit found harmless for Skilling. In contrast, in the Eleventh Circuit in Cabrera, the court found the jury instructions incorrect and vacated the conviction. One could stop here and note that the differences in harmless error analysis may be an interesting question for later Court decisions.
But what is more interesting is that the government conceded the evidence in Cabrera did not meet 1346 as interpreted under Skilling. Why didn't they take this same posture in Ryan, Black and Skilling? Did the special verdicts work in this case, just because the jury had only checked the honest services box? Did the government not want this case to be the testing ground should a case go up on appeal?
But the government then attempted to retry the Cabrera case, despite their concessions that a Skilling reversal was warranted.. The court on remand in Cabrera starts its analysis with "The Double Jeopardy Clause of the Fifth Amendment to the United States Constitution provides in relevant part: '[N]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb." The order provides a wonderful double jeopardy analysis.
Court's Order –Download Samir Cabrera
(esp)
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The press is reporting here, here, here, and here, that Former Illinois Governor Rod Blagojevich has been found guilty of 17 counts, not guilty on one count, and two counts with no verdict. This was the second trial, the first ending in a hung jury except for one count. The jury was out this time for 10 days. Blagojevich did not testify in the first trial, but did testify this time.
A second trial was an enormous benefit to the government. They had the opportunity to re-evaluate their case and to see that keeping it simple was the smarter choice. They also had the conviction on one count to allow them to start cross-examination against him with the "convicted felon question."
Why is it that so many Illinois Governors wind up as convicted felons? (e.g. Otto Kerner, Dan Walker, George Ryan, and Rod Blagojevich).
(esp)
Addendum – Doug Berman, Sentencing Law and Policy Blog here
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A fascinating opinion vacating convictions and reversing the district court, was issued by the Sixth Circuit in the case of U.S. v. Ford. This appeal concerned convictions for false statements and two counts of "honest services" wire fraud. This case does not pertain to another case against Ford in which he was sentenced to 5 1/2 years imprisonment.
The government's problem with the 1001 conviction was that the statute was inapplicable to the defendant's conduct. Section 1001 requires federal jurisdiction. As stated by the court in noting the defendant's argument, "while the facts that he failed to disclose concerned an entity inseparable from federal ties, the entities to which he failed to disclose those facts were anything but federal." The court noted that the "failures to disclose financial interests were related to functions of the state government of Tennessee – the senate's and election registry's reporting requirements." The court also used the rule of lenity in support of its vacating these convictions.
The wire fraud counts were easier – Skilling limited honest services to "bribery and kickbacks," and that was not the case here.
Attorneys Representing Ford were Paul Mogin, William E. McDaniels, & M. Jesse Carlson (Williams & Connolly LLP).
(esp)
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Oh well. Nobody ever accused Judge Posner of being subtle. Bottom line: the Seventh Circuit upholds the obstruction of justice and two fraud counts and sends one count back for retrial. But then Judge Posner suggests that the government move to dismiss the remanded count and that the trial court re-sentence Black to the original sentence based on the acquitted conduct. He also manages to hold forth on "the obviously nonexistent crime" of "carnal knowledge of a fictional mouse." You just have to read it. Here is yesterday's opinion in U.S. v. Conrad M. Black, et al.
(slw)
MattBray.net 