Public Officials Have Charges Thrown Out in the Wake of Operation "Bid Rig," Allege that Sting Was Politically Motivated

Back in July of 2009, we considered one of the largest political corruption sting operations in the nation's history, FBI Operation "Bid Rig," which resulted in the arrest and charging of 44 individuals, primarily in New Jersey. Well, at least one of the individuals, former New Jersey State Assemblyman Louis Manzo, fought the charges, as reported by the Atlanta Journal-Constitution. Nearly three years and $150,000 in legal bills later, Manzo has filed a Hyde Amendment motion for reimbursement of his legal fees. A Federal court found Manzo's conduct--agreeing to take money from a former real estate speculator and Ponzi schemer, Solomon Dwek, who cooperated with the government and provided much of the evidence used to charge and prosecute the defendants--"reprehensible," but that his actions did not violate Federal law.

The charges against Manzo were the result of an approximately three year investigation, costing millions of dollars, initiated in 2006 by current New Jersey Governor Chris Christie when he was U.S. Attorney. A judge ruled in 2010 that the government had erroneously charged some of the defendants, who were running for elected office, using laws which applied to officials who had actually been elected. Approximately three-quarters of the defendants from the sting have entered guilty pleas. Six, including Manzo; New Jersey State Assemblyman L. Harvey Smith; Ridgefield, New Jersey, Mayor Anthony Suarez; and candidate for the Jersey City Council Lori Serrano, had the charges dropped or thrown out. Manzo and Serrano have claimed that the sting was politically motivated by Christie in order to increase his chances for election as Governor in 2009.

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The U.S. Attorney's Office for the District of New Jersey dropped charges against 16 of 22 businessmen arrested following a similar sting for alleged bribery of foreign officials after it failed to win convictions in two trials.

Whether you are facing or expecting criminal charges, call the attorneys at Gillen Withers & Lake LLC in Atlanta (404) 842-9700 or Savannah (912) 447-8400. Handling every sort of criminal investigation or prosecution, in the Southeast and Nationwide.

78 Year-Old Indicted Warner Robbins City Councilman Released After Violating Probation for Alleged Fiancee Less Than Half His Age

Former City Councilman of Warner Robins, Georgia, John Williams, was released last Friday after spending two days in prison for violation of his Federal pretrial release, according to 13WMAZ in Macon. Williams has been charged with extortion in the U.S. District Court for the Middle District of Georgia for trying to obtain money from a car dealer in exchange for arranging the sale of a truck to a police department. Williams, 78, violated the terms of his release by driving to Florida to post bail for Stormy Smith, 32. Smith has told police that she and Williams are engaged. Williams' current wife, Elna Williams, got into an altercation with Smith and allegedly threatened to kill her. Williams lost his re-election bid last November, and is scheduled to go to trial on the Federal charges on April 23rd.

Julian Heicklen, 80 Year-Old Jury Nullification Advocate, Charged With Jury Tampering

"No free man shall be captured, and or imprisoned, or disseised of his freehold, and or of his liberties, or of his free customs, or be outlawed, or exiled, or in any way destroyed, nor will we proceed against him by force or proceed against him by arms, but by the lawful judgment of his peers, and or by the law of the land."

The above passage from the Magna Carta of 1215, in which the nobility of England forced King John to proclaim various liberties, is among the earliest expressions of the concept of "jury nullification." Jury nullification refers to the power of a jury to acquit a defendant in a criminal case despite the fact that the defendant is in violation of the law. The jury may acquit the defendant out of mercy, or out of disagreement with the law. The principle is part of the Sixth Amendment right to trial by jury, and has deep roots in common law. As, John Jay, the first Chief Justice of the United States Supreme Court observed, a jury has "a right to determine the law as well as the fact in controversy." Georgia v. Brailsford, et al., 3 U.S. 1 (Dall.) (1794).

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Given the long tradition of jury nullification, it is somewhat of a surprise that Julian Heicklen, an 80 year-old former chemistry professor from Teaneck, New Jersey, was arrested last week for distributing pamphlets advocating jury nullification on the steps of the U.S. District Court for the Southern District of New York, as reported by Thompson Reuters. Heicklen's pamphlets informed potential jurors that they could follow their consciences in rendering a verdict, and urged them to acquit if they disagreed with the law or the government's conduct in the case. The literature contained statements such as "Juries were instituted to protect citizens from the tyranny of government," and "It is not the duty of the jury to uphold the law. It is the jury's duty to see that justice is done."

Heicklen was charged with one count of jury tampering in the case of U.S. v. Heicklen, Case No. 10-1154. He is representing himself. Both the prosecution and U.S. District Judge Kimba Wood have taken the view that advocating jury nullification potentially undermines the judicial system.

The prosecution also maintains that Heicklen's activities are not protected by the First Amendment due to the fact that they took place on Federal property. The Assistant U.S. Attorney prosecuting the case observed that if Heicklen had handed out the pamphlets further away from the courthouse, it would have been less likely that he would have been charged with violating the statute.

A lawyer assisting Heicklen in his defense contended that the location where Heicklen distributed the literature is a public forum, where expressive activity routinely takes place. Heicklen's jury nullification advocacy was also not directed at any particular case or juror.

Atlanta/Fulton County Sheriff's Deputy Sentenced to Ten Years

A deputy sheriff with the Fulton County Sheriff’s Office in Atlanta was sentenced in federal court today to serve 10 years in federal prison. Brian Anthony pleaded guilty earlier this year, according to the Atlanta Journal Constitution, to multiple counts in a superseding indictment. According to the plea agreement, Anthony entered into a binding plea requiring him to serve 10 years in prison. U.S. District Court Judge Steve Jones accepted the plea in court today and ordered Anthony to serve 10 years for attempting to smuggle marijuana, cell phones and cigarettes into the Fulton County Jail. Anthony also accepted $25,000 cash from an undercover officer to provide protection for cocaine deliveries in the Atlanta area.

Anthony is the fourth defendant to be convicted in an undercover FBI investigation into corruption into the Fulton County Jail. Anthony is cooperating with the FBI according to his plea agreement.

Chinese-American Former Motorola Employee Acquitted on Espionage Charge

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On February 28, 2007, Hanjuan Jin, a Chinese-American and engineer for Motorola, attempted to board a one-way flight for Beijing, China, at Chicago's O'Hare International Airport. She was stopped by Federal agents before she could board the flight and found to be carrying a computer and other electronic storage devices containing more than 1,000 proprietary Motorola documents.

Jin was charged in the U.S. District Court for the Northern District of Illinois with espionage and theft of trade secrets. Prosecutors alleged that Jin intended to provide the information to Sun Kaisens, a Chinese telecommunications company and supplier to the Chinese military.

Yesterday, as reported by the Chicago Tribune, U.S. District Judge Ruben Castillo, following a bench trial, found Jin guilty on the trade secrets counts, but acquitted her on the espionage count. The Judge held that while there was evidence that Jin intended to betray Motorola, there was no evidence that she intended to betray her adopted country.

The Jin case is one of a series of recent prosecutions of alleged espionage on behalf of the People's Republic of China. This week, prosecutors in California obtained an indictment against the Pangang Group, a Chinese company, for conspiracy to commit economic espionage against chemical giant DuPont, and last July, Chunlai Yang, a computer programmer, was indicted for allegedly stealing trade secrets from trading exchange operator CME Group.

Alabama Legislators and Casino Employees to Be Re-Tried


The U.S. District Court for the Southern District of Alabama has postponed the retrial of eight defendants on corruption charges relating to the gambling industry and various State legislators and employees, originally scheduled to commence on October 3, until January 9, 2012, according to The charges stemmed from an FBI investigation into alleged bribery of legislators relating to an upcoming vote on a gambling bill. Two of the defendants, Alabama State Senator Quinton Ross and VictoryLand casino lobbyist Bob Geddie, were acquitted on August 11, following a nine week trial and an additional week of jury deliberations. The jury deadlocked as to the other defendants. None of the defendants were convicted.

The Court stated that ti would rule on whether to retry the defendants together or in separate trials. The defense has opposed severance, citing that the defendants were all tried jointly and claiming that the government is attempting to change the rules midway through the game.

The defense raised concerns regarding the rescheduled date, suggesting that it might conflict with the college football National Championship game in New Orleans. 

New York Senator May Be Retried in Wake of Supreme Court's "Honest Services" Fraud Decision

New York Senator Joseph L. Bruno was indicted in January of 2009 on eight counts of fraud. A jury in the U.S. District Court for the Northern District of New York acquitted Bruno, who is now 81 years old and the former Republican Majority Leader of the New York State Senate, on five of the remaining charges and deadlocked on the sixth in December of 2009. The charges were based on allegations that Bruno allegedly took approximately $3 million in kickbacks from businesses seeking to do business in New York, as well as labor unions. In particular, Bruno s alleged to have accepted $280,000 in "consulting fees" from companies associated with Loudonville, New York, businessman Jared Abbruzzese. Bruno was sentenced to two years' imprisonment last May, but has remained free pending his appeal in the U.S. Court of Appeals for the Second Circuit.

Now the U.S. Attorney's Office has filed a brief with the Court of Appeals requesting that the dismiss the charges against Bruno and remand his case for a new trial, as reported in the Saratogan. The prosecution argued that Bruno's convictions under 18 United States Code Section 346--the honest services fraud statute--cannot stand following the U.S. Supreme Court's decision in U.S. v. Skilling, the case against former Enron executive Jeffrey Skilling, as the Blog has noted here. However, it maintains that it can obtain another indictment of Bruno under the statute, as amended by Skilling. The government contends that it will be able to prove a quid pro quo if Bruno is ordered retried. Bruno and his counsel have filed a brief with the Court of Appeals arguing that any retrial of Bruno would violate double jeopardy.

Life in Shambles for New Hampshire Psychiatrist Acquitted of VA Charges

Dr. William Weeks had a life many would envy. He was a prominent psychiatrist, a professor at Dartmouth College, a physician at the local Department of Veterans’ Affairs hospital, a nationally-recognized expert on rural healthcare, the head of his town’s School Board and treasurer of his church.

However, as reported by Fox News, his life fell apart after 2004 when investigators conducting an audit began looking at five $1.5 million contracts between Dr. Weeks and the VA hospital. The VA was believed to have developed an animus against Dr. Weeks over his articles in medical journals discussin how the VA could improve healthcare to veterans in rural areas by using non-VA providers. The investigation led in 2009 to Dr. Weeks being charged with five misdemeanor charges of violations of conflict of interest rules. The government alleged that Dr. Weeks placed himself on both sides of the contracts and funneled unused grant monies to his expense account at Dartmouth to pay for a sabbatical.  The VA also filed a civil action against him.


Fortunately for Dr. Weeks, he was acquitted on all counts following an eight day trial in April. However, his life had been ruined. He was terminated from his position, his marriage fell apart, he had incurred six-figure legal bills and he had attempted to commit suicide three times—twice by carbon monoxide and once by pills. The VA agreed to pay Dr. Weeks $800,000 to settle his civil claims. However, it insisted that he resign his position as a condition. Darmouth also agreed to pay the VA to settle allegations of improper conduct involving the administration of contracts with the hospital. Prosecutors continue to maintain that the prosecution was justified.


Alabama Contractor Roger Taylor Acquitted of Conspiracy, Bribery and Obstruction Charges Following Federal Trial; Avoyelles Parish Sheriff Bill Belt and Family Acquitted

On Tuesday, a jury in the U.S. District Court for the Northern District of Alabama in Tuscaloosa found construction contractor Roger Taylor not guilty on one count of conspiracy, five counts of bribery and two counts of obstructing justice, according to Tuscaloosa News. Mr. Taylor was one of numerous individuals investigated in relation to Alabama's Community College System. Mr. Taylor, co-owner of Hall-Taylor Construction, and was alleged to have bribed former two-year college Chancellor Roy Johnson by paying for more than $92,000 in construction costs and appliances at Johnson’s home in Opelika, Alabama, in exchange for awards of construction management work within the system. The government alleged that Mr. Taylor  was awarded $4 million in no-bid state contracts from 2002 to 2006 in exchange for the alleged bribes.

Mr. Taylor's trial began on October 25. He  was originally charged with 17 counts, but the majority of these were dropped after a successful appeal by a co-defendant. At trial, however, the prosecution failed to present any testimony showing that Johnson alleged directed or threatened college presidents to hire Hall Taylor on contracts for a massive makeover of the college system. On the contrary, witnesses testified that another construction management firm received a fair share of the contracts. The witnesses at the trial also praised Hall-Taylor's work. Mr. Taylor's counsel made the trial into a referendum on Johnson's credibility. Johnson pled guilty to 14 charges of conspiracy, bribery, witness tampering and money laundering in January of 2008. He is scheduled to be sentenced on November 18.

17 individuals, including former state legislators, college presidents and the system chancellor, have either pled guilty or been found guilty by a jury as a result of the investigation. A spokesperson for the U.S. Attorney’s Office for the Northern District of Alabama issued a statement that the prosecution believed it had presented sufficient evidence to find Mr. Taylor guilty of the bribery and obstruction charges, but that it respected the jury's verdict. The government has a companion civil forfeiture case against Hall-Taylor's assets. Mr. Taylor's counsel stated that the prosecution intimidated and threatened witnesses at the grand jury investigating Johnson, and have indicated that Mr. Taylor may seek recourse for the prosecution's actions.

In other positive Federal criminal news, Bill Belt, the former Sheriff of  Avoyelles Parish, Louisiana, his wife, Tracy Belt, and his sister, Julie Bernard, were found not guilty of conspiracy, mail fraud and obstruction of justice last week by a jury in the U.S. District Court for the Western District of Louisiana after a trial which also began on October 25, according to

In 1988, Sheriff Belt allegedly contracted with Michael and Rae Johnson to install pay  telephones  for prisoners in Avoyelles Parish in a venture called Cajun Callers. Under the agreement, Cajun Callers would pay a monthly commission to the Sheriff's Office. The Johnsons made large amounts of money  from the venture, which they failed to pay taxes on. Johnson subsequently became a Louisiana  State Judge, but  was removed from the bench due to ethical violations relating to Cajun Callers. The government alleged that Sheriff Belt was paid kickbacks.

In 1990, Sheriff Belt's future wife began keeping the books for two companies She owned: Southern Louisiana Communications, which operated public pay phones; and Central Louisiana Communications, which operated phones in Louisiana parish jails.

Rae Johnson testified at trial that Tracy Belt would allegedly take money collected from the pay phones and deposit it and then write three checks in identical amounts--one of which was to her husband's tax account from which taxes were never paid. Johnson stated that she would allegedly cash one of the other checks and deliver the money to Mrs. Belt. Sheriff Belt's counsel undermined Johnson's account of the triple-check scheme on cross-examination, however. Counsel argued in closing that Johnson was a liar who escaped prosecution herself by making up stories about the Belts. The government also presented the testimony of a convicted male pedophile who installed the Cajun Callers phones in the jails, and another convicted felon who served time for crimes including insurance fraud.

Massachusetts Defendants Convicted for Shipping Electronics Equipment to China's Military

Yesterday, after a five week trial, a jury in the U.S. District Court for the District of Massachusetts found Zhen Zhou Wu, a/k/a Alex Wu; Yufeng Wei, a/k/a Annie Wei; and Chitron Electronics, Inc., a corporation based in Shenzhen, China, with an office in Walthan, Massachusetts, guilty of conspiring to violate U.S. export laws and illegally exporting electronic equipment from the United States to the Peoples' Republic of China, according to a press release by the Boston Office of the Federal Bureau of Investigation.

From 2004 to 2007, Chitron purchased equipment used in electronic warfare; military radar, guidance and control equipment; satellite communications, including global positioning systems; and fire control and exported the equipment to China through Hong Kong. The equipment is primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications. The defendants sent the equipment to Chinese military entities and research institutes, including China Electronics Technology Group Corporation. The equipment was shipped without export licenses from the Department of Commerce, in violation of the U.S. arms embargo against China which has been in place since 1990. The press release notes that the equipment could make a significant contribution to weapons systems and fighting capabilities of adversaries of the U.S.


Wu and Wei were also convicted of filing false shipping documents with the U.S. Department of Commerce, and Wei was convicted of immigration fraud for using a U.S. Permanent Resident Card which she allegedly knew had been procured by making false and fraudulent statements to immigration officials in order to enter the U.S. A co-defendant, Bo Li, a/k/a Eric Lee, previously pled guilty to making false statements on shipping documents.

Developer, Bank Executives Indicted Over $80 Million in Loans/Failure of Integrity Bank

Last week, an indictment was unsealed in the U.S. District Court for the Northern District of Georgia, charging Guy Mitchell of Coral Gables, Florida, and Douglas Ballard and Joseph Todd Foster, of Atlanta, with bribery, insider trading and securities fraud, as reported in the Atlanta Journal Constitution.

Mitchell was a hotel developer and Ballard was a vice president with Integrity Bank in Alpharetta, Georgia. Beginning in 2004, Mitchell allegedly took out tens of millions in loans from Integrity for alleged real estate ventures, including $29 million to purchase Casa Madrona, a 63 room resort hotel overlooking San Francisco Bay, and for the purchase of an island in the Bahamas. Ballard allegedly authorized the loans and draw downs, in exchange for accepting more than $230,000 in kickbacks from Mitchell.

The indictment alleges that Mitchell misled Integrity's Board of Directors regarding the amount of work which had been done on the hotel. Integrity's Board claims that it never approved many of the loans.

Foster, vice president of risk management for Integrity, allegedly sold 30,000 shares for $350,000 after discovering that Integrity did not have enough liquid security to cover a $20 million loan to Mitchell.

Integrity, a faith-based bank, sustained an alleged $80 million in losses and constitutes the fourth largest of Georgia's many bank failures. The bank was shut down by the Federal Deposit Insurance Corporation in August of 2008.

The defendants have pled not guilty. Mitchell was released on a $2.5 million bond and Ballard was released on a $200,000 bond.

Georgia Trio Claim $1 Million in False Tax Refunds; Locust Grove Couple Sentenced for Illegal Disposal of Napalm Bursts

In Georgia federal criminal news, Jamil Flowers pled guilty on Tuesday in the U.S. District Court for the Northern District of Georgia to conspiracy to defraud the government and making false claims and statements to the IRS for defrauding the federal government of more than $1 million in tax refunds, according to the AJC. Flowers, Rico Lampkin and Jason Soudemire, who have also pled guilty, admitted to filing more than 100 tax returns containing false statements of income and withholding. Most of the false returns contained false 1099-R forms showing that the taxpayers had allegedly received money from a pension with the U.S. Railroad Retirement Board. The conspirators used other persons to open bank accounts to receive the tax refunds.

According to a press release by the U.S. Attorney's Office for the Northern District of Georiga, John Duffey and Jennifer Duffey of Locust Grove, Georgia, were both sentenced to a year and a day in the Northern District for illegally disposing of hazardous wastes. The Duffeys operated a company Joint Military Development Services (JMDS), which conducted training exercises for the military. JMDS purchased approximately 560 "napalm bursts," containing napthalene, a federally-listed hazardous waste. The Duffeys were charged with burying the napalm bursts on an adjacent landowner's property in Locust Grove, Georgia, rather than paying to have the bursts lawfully disposed of. JMDS did not have a permit from the Environmental Protection Agency to dispose of the waste.

Eleventh Circuit Hears Arguments From NFL and Retired Players in Appeal Over Suit Arising From $11 Million Ponzi Scheme

Today's Fulton County Daily Report contains a story concerning Tuesday's oral arguments before the Eleventh Circuit Court of Appeals in an appeal by retired professional football players against the National Football League and the NFL Players Association. The former players are seeking to reverse a ruling last year dismissing the players' suit against the NFL and the Player's Association regarding a Ponzi scheme by an alleged broker and financial advisor, Kirk S. Wright, with whom the players had invested millions of dollars.

The plaintiffs allege the Player's Association allowed Wright to be placed on a list of approved financial advisors. The plaintiffs allege that a background check would have revealed multiple liens against Wright and his business partner, Nelson "Keith" Bond, and that neither Wright or Bond were licensed financial advisors in any state. Wright was convicted for fraud and money laundering in 2006. He is alleged to have defrauded investors, including professional athletes, entrepreneurs and his very own mother, of approximately $150 million.

The plaintiffs invested a total of $11 million with Wright and Bond and their partnership, IMA. Wright committed suicide in a jail in Union City, Georgia, three days after he was convicted. IMA is in bankruptcy. A staggering 170 lawsuits have been filed seeking restitution as a result of Wright's activities, including by investment firms Lehman Brothers Inc., Oppenheimer & Co. Inc., J.B. Oxford & Co., Banc of America Securities LLD and TD Ameritrade Inc., and law firm Gambrell & Russell.

The plaintiffs include retired players Steve Atwater, Blaine Bishop, Carlos Emmons, Clyde Simmons and Al Smith. Atwater was a free safety for the Denver Broncos and New York Jets from 1989 to 1999; Bishop was a safety for the Houston Oilers, Tennessee Titans and Philadelphia Eagles from 1993 to 2002; Emmons was a linebacker for the Pittsburgh Steelers, the Eagles and the New York Giants from 1996 to 2006;Simmons was a defensive end for the Eagles, the Arizona Cardinals, the Jacksonville Jaguars, the Cincinnati Bengals and the Chicago Bears from 1986 to 2000;  and Smith was a linebacker for the Oilers from 1987 to 1996. "Assassin" Atwater in particular is a two time Superbowl winner with the Broncos, an eight-time Pro Bowl selectee, a two-time First Team All-Pro Selectee who has been considered for the Pro Football Hall of Fame. The players' filed suit against the NFL and the Players' Association in the U.S. District Court for the Northern District of Georgia. However, in March of 2009, District Judge Julie E. Carnes dismissed the plaintiffs' suit.

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The plaintiffs' attorneys argued to the panel, which included Judge Gerald B. Tjoflat and Judge David M. Ebel, a visiting Senior Judge from the Tenth Circuit Court of Appeals, that the District Court's order deprived the players of any remedy and effectively gave the NFL and the Player's Association immunity. The panel pointed out that the players' collective bargaining agreement appeared to pre-empt the players from filing suit. Counsel for the players' union countered that the plaintiff's failed to inquire with the Players' Association regarding Wright prior to investing millions of dollars with him. The case turns on whether the retired players are still governed by the collective bargaining agreement, which would bar their suit against the NFL and the Players' Association since it provides that players are solely responsible for their own finances.


SEC Charges Prominent South Florida Cuban-American Couple with $135 Million Ponzi Scheme

The Securities and Exchange Commission has charged prominent Miami businessman Gaston E. Cantens and his wife, Teresita Cantens, with allegedly running a $135 million Ponzi scheme targeting elderly Cuban-Americans, according to the Miami New Times.

Specifically, the Cantens allegedly used their development company, Royal West Properties, to sell promissory notes to finance the purchase of properties, representing that the investments were safe and would yield annual returns of 9 to 16 percent. When property owners began to default on their mortgages, however, the Cantens purportedly used monies from new investors to pay returns to previous investors. The Cantens are alleged to have persuaded investors by using their prominent standing in the community and claiming that Jesuit priests and other religious leaders had entrusted their money to them, targeting investors at social and religious gatherings and through national television ads on Spanish language channels. The Cantens were allegedly never authorized to sell the securities by the SEC. They furthermore are alleged to have diverted $20 million of the funds to themselves, their children and their grandchildren, and to finance their other businesses. 

Gaston Cantens was an advisory board member for Belen Jesuit Preparatory School. The Cantens are the parents of former Florida State Representative Gaston I. Cantens, who served from 1998 to 2006 as a Republican representing District 114, and is currently is a Vice President at Florida Crystals Corporation.

Forensic Accountant Lewis Freeman Indicted for Alleged Misappropriation of $6 Million in Funds from Fiduciary Accounts

As reported in the South Florida Business Journal, Lewis B. Freeman, one of the best-known forensic accountants in South Florida was indicted yesterday in the U.S. District Court for the Southern District of Florida on charges of conspiracy to commit mail fraud. Freeman is alleged to have misappropriated funds from fiduciary accounts from 2000 through 2009 by writing checks to himself and his firm, Lewis B. Freeman & Partners, and depositing the funds into the firm's operating account. Freeman is alleged to have misappropriated some $6 million in funds by writing approximately 162 unauthorized checks and using the proceeds to support a lavish lifestyle.

Freeman put his firm into receivership last fall during the federal criminal investigation. The firm previously did millions of dollars in business. The government alleges that out of the $6 million misappropriated, some $2.6 million of clients' monies were lost. Freeman, oddly, worked routinely as an expert for the court in liquidating the assets of companies. According to Freeman's counsel, he turned himself in and is cooperating with authorities. His counsel have stated that he made "serious mistakes," and will "accept the consequences for his actions.” 

Former Head of SK Foods Indicted for Food Fraud and Mislabeling

Frederick Scott Salyer, 54, former owner of  California-based SK Foods, which grows, processes and distributes tomatoes, was indicted on Friday on charges of racketeering, wire fraud, mail fraud, money laundering and obstruction of justice. Tomatoes from SK Foods are widely used in tomato-based products including sauces, ketchups and juices.

Salyer is alleged to have manipulated the industry through price fixing, bribery and mislabeling. Specifically, he is alleged to have bribed purchasing managers at food companies to guarantee that the companies purchased SK Foods' products over its competitors and for its competitors' pricing information. Salyer is also alleged to have ordered the mislabeling of products  As a result, consumers received dated and moldy products, and products mislabeled as organic at higher prices. In some cases, products as much as three years old with a shelf life of one year, or containing mold levels beyond limits set by the Food and Drug Administration, were alleged to have been placed on the market.

Salyer was arrested earlier this month at John F. Kennedy Airport in New York upon arriving on a flight from Switzerland. He had allegedly fled the U.S. last fall to relocate to a country where he could not be extradited after some of his subordinates pled guilty to charges in relation to the investigation, a joint effort by the FBI, IRS, FDA and Department of Justice Anti-trust Divison, nicknamed Operation Rotten Tomatoes. Salyer is alleged to have arranged for the transfer of millions of dollars to overseas accounts, and to have placed a $7 million home in Pebble Beach on the market. Salyer was denied bail.

SK Foods declared bankruptcy last May and has been acquired by another company.

Edward Stein, Architect of $46 Million Hedge Fund Ponzi Scheme, Sentenced to 9 Years

Edward T. Stein, a former hedge fund manager, was sentenced to nine years in prison in the U.S. District Court for the Eastern District of New York for a Ponzi scheme which defrauded investors of $46 million, according to BusinessWeek. Stein was arrested last April and pled guilty last June to counts of securities fraud and wire fraud.

Stein was alleged to have operated a Ponzi scheme from 1988 to 2009, targeting friends, acquaintances and vulnerable investors. The government alleged that Stein promised to invest clients' money in annuities but instead converted the monies to his own use. Stein managed Gemini Fund I hedge fund, Prima Capital Management Corp., and DISP LLC, a firm which invested in life insurance policies. Stein, through Gemini, invested in fashion magazine publisher Detour Media Group, Inc., and used money from new investors with Gemini to repay selected clients. In all, some 83 investors were affected by the scheme. Stein used his gains to, among other things, purchase a $1 million apartment in Manhattan.


Stein, who is 60, faced up to 19 years in prison, however U.S. District Judge Jack B. Weinstein found that the circumstances of the scheme placed it outside the "heartland" of fraud cases. Judge Weinstein stated that Stein's age made it unlikely that he would commit any further crimes. Stein's counsel had argued for a reduced sentence based on Stein's assistance to authorities in locating assets.


Several of Stein's victims testified at the hearing. One called Stein “a money-hungry, evil, sly fox who preyed on seniors.” Stein offered an apology for his actions in his address to the court.


Investment Advisor Jailed for Refusing to Locate Assets from $130 Million Alleged Investment Scheme

Trevor Cook was 37 year-old Minneapolis, Minnesota-based investment advisor. He is alleged to have defrauded investors of at least $130 million. U.S. District Judge Michael Davis found Cook in contempt of an order by the Court requiring Cook and his associates to turn in investor assets to a receiver, according to an article in the Minneapolis Star-Tribune. Cook invoked his Fifth Amendment privilege against self-incrimination in response to questions regarding money, assets and offshore accounts. U.S. Marshals took Cook into custody yesterday. The Court ordered Cook to remain incarcerated until he cooperates with the receiver and surrenders monies and assets, including a houseboat and a submarine. Cook is also ordered to assist in the recovery of a computer and other records.

Cook pitched currency investments to investors. The alleged scheme was promoted by Cook and Pat Kiley in a widely broadcast radio program called "Follow the Money." Cook used a vast array of business entities and bank accounts to funnel monies from investors, including eight accounts in the U.S. and 19 foreign accounts in a dozen countries. The structuring of the transactions and the fact that some of the foreign accounts are in countries noted for being bank secrecy havens has made the monies difficult to locate. Cook has not yet been indicted.

DeKalb County Man Arrested in Multimillion Dollar Ponzi Scheme; Victims Included Parents


As reported by the Atlanta Journal-Constitution and WSB Radio, Anthony Ray, a DeKalb County resident, solicited money from investors by promising them large returns from real estate investments by his company, Key Funding Group. He would frequent local churches to locate victims, making presentations to the congregations. Ray lulled his victims by giving them back portions of their investment and falsely referring to them as returns. Ray hosted his victims at several locations around the Atlanta area, including his condominium in Buckhead as well as a $680,000 home in Decatur, Georgia, which belonged to one of his victims and in which he ran his office. In all, Ray stole at least $5 million from over 30 investors.

Ray stole $160,000 from his own parents. He started Key Funding Group with his father, Calvin Ray, 70, and took out large loans using his father’s identity and his parents’ home as collateral. His parents subsequently turned him in. Ray’s twin brother, Antonio, told reporters that Ray took everything his parents had, and that their father, decided that they had to prosecute.

Ray previously served five years in prison for stealing his brother's identity.



VA Doctor Pleads Guilty to Issuing Between 50K to 100K Prescriptions Online

Online pharmaceuticals are big business and, frequently big sources of violations of the Food and Drug Act, including criminal ones. Accordingly, Mechanicsville, Virginia, doctor Torino Jennings pled guilty last week in federal court to seven counts of introducing misbranded drugs into interstate commerce and four counts of tax evasion. Jennings was charged with issuing between 50,000 to 100,000 prescriptions between 2004 and 2007 to persons who filled out forms for online pharmacies.

Jennings was paid $5 to $7 per perscription. He failed to report the income to the Internal Revenue Service, however. Jennings will be sentenced in November and faces a maximum of five years in prison.

"Nuwaubian" Leader and Mass Child Molestor Dwight York Seeks to Vacate 135 Year Sentence Based on Alleged Prosecutorial Misconduct

As reported in the Macon Telegraph, Dwight "Malachi" York, former leader of the United Nuwaubian Nation of Moors who was indicted and convicted on over 100 counts of child molestation in April 2004 and setenced to 135 years, has filed a motion in the U.S. District Court for the Southern District of Georgia to vacate his sentence. York, who has been a minister and a musician, is best know as the founder of "Nuwaubianism," an unorthodox religious sect established in the 1970s. In 1993, York moved the Nuwaubians from upstate New York to a compound in Putnam County, Georgia, near Eatonton. York was arrested for sexually molesting dozens of children in 2002. The charges against York were truly astounding and hideous in their magnitude--author Bill Osinsky, in the fact sheet for his book Ungodly, reveals that state prosecutors literally had to cut back the number of counts listed in the indictment from well over 1,000 to slightly more than 200 because "they feared that a jury simply would not believe the magnitude of York's evil."

York has now filed a motion alleging that Federal Bureau of Investigation agents threatened witnesses to give perjured testimony against him, as well as alleging that the prosecution used unauthenticated tapes of York having sex with minors to taint the jury. The motion attached affidavits from witnesses in York's trial, including one by a witness who alleges that FBI agents took him from his family and transported him to a home in Milledgeville and pointed guns at him until he agreed to give information against York. York is currently incarcerated at the supermax prison in Florence, Colorado.


Alleged Middle Georgia Ponzi Schemer Release on Bond / Entire U.S. District Court for the Middle District Recused

Alleged Middle Georgia fraudster, Saundra McKinney Pyles, 52, was ordered released on a $20,000 secured bond yesterday, as reported in the Macon Telegraph. As we have noted, Pyles and Sheldon Hutcheson, 56, were indicted in the U.S. District Court for the Middle District of Georgia in April on mail fraud and money laundering charges for defrauding investors out of $2 million in a Ponzi scheme. Hutcheson and Pyles are charged with soliciting investments in a hedge fund named Georgia Ionics Fund LLC, losing $780,000 of investors' monies and pocketing another $1.3 million. Hutcheson's and Pyles' victims include more than four dozen investors, including a retired Superior Court Judge.

The magistrate judge originally denied Pyles bond last month, however Pyles' attorney, Reza Sedghi, appeal the denial to the District Court, which held that the magistrate erred in denying bond. The magistrate also denied bond for Hutcheson, who remains in custody.

All four judges of the Middle District of Georgia have recused themselves from Hutcheson's and Pyles' case because of familiarity with some of the alleged victims. Jack T. Camp, a Senior District Judge from the Northern District of Georgia, has been assigned the case.


Craigslist Sues South Carolina AG to Enjoin Prosecutorial Threats, Prosecution

On Tuesday, we wrote that Craigslist CEO Jim Buckmaster had demanded an apology from South Carolina Attorney General Henry McMaster over McMaster's perceived threats of prosecution against the online classifieds service for allegedly facilitating prostitution. Well, Craigslist has apparently decided not to wait for McMaster's response and filed suit on Wednesday against McMaster in the U.S. District Court for South Carolina, as reported by the San Francisco Chronicle.

The lawsuit accuses McMaster of violating Craigslist's constitutional rights through threats of prosecution. Craigslist alleges that the threats chilled its First Amendment right to free speech and violated the Commerce Clause's prohibition on states regulating businesses beyond their borders. Craigslist has requested that the court prevent McMaster from making addition threats of prosecution or from prosecuting the company.

McMaster responded to the suit Wednesday by stating that the suit was evidence that Craigslist was finally taking the problem of prostitution seriously. He stated that he was required to inform the site of possible criminal violations, and stated that he hoped Craigslist would adhere to the standards which it has entered into an agreement with several states' attorneys' general to follow. McMaster did not make any additional threats against the company, but claimed that it was "a victory for law enforcement and for the people of South Carolina."


One commentator observed that the Communications Decency Act of 1996, which sheilds internet companies from liability for what their users post, probably would have protected Craigslist from prosecution.

We note that Craigslist has not threatened or taken any action against New York Attorney General Andrew Cuomo, who commented on Wednesday that "Until Craigslist gets serious about putting real protections in place, it will continue to be an environment where criminal operations thrive with impunity. " Cuomo indicted seven individuals this week on charges of  operating a prostitution ring in 2007 and 2008 that advertised exclusively in Craigslist's erotic services category.

Another Georgia Ponzi Scheme

Georgia appears to have become fertile ground for Ponzi scheme frauds as of late. The latest chapter in Ponzimonium, as reported by the Atlanta Business Chronicle, came on Thursday, when the President and Chief Executive Officer of Alpharetta, Georgia, based CRE Capital Corporation, James G. Ossie, pled guilty to one count of wire fraud. Ossie is alleged to have raised $25 million through a scheme in which Ossie and CRE offered investment contracts in amounts of at least $100,000 which guaranteed investors the full return of their deposit plus 10 percent interest within 30 days. The investment contracts allegedly focused on options contracts in foreign currencies. Ossie and CRE operated the scheme from April 2008 until January 2009, when the Securities and Exchange Commission shut down the scheme.

Ossie would use salespeople referred to as "correspondents" to solicit investors online and through conference calls with groups of investors. Ossie and CRE eventually had 120 investors from Georgia, California, South Carolina and Texas.

The indictment charges Ossie claimed that he made even greater monies through trading, which allowed him to create a "cash reserve fund" sufficient to repay all investors their deposit, plus the 10 percent profit, regardless of how the markets performed. He claimed that CRE hired outside accountants and auditors who confirmed that the numbers were accurate.

However, the indictment relates that these representations were false--there was no "reserve fund" and instead of making enough to repay investors, Ossie and CRE lost millions of dollars, mostly on unsuccessful currency trading. During the nine month scheme, CRE lost more than $12 million in foreign currency trading accounts. At the end of last year, the company owed more than $23 million in pending investment contracts, but only had $2 million in its accounts. Since there were no profits, Ossie could only repay investors through a Ponzi scheme recruiting new investors.

Ossie's sentencing is scheduled for July 30. He faces a maximum sentence of 20 years and a $250,000 fine.


Former Federal Prosecutor Indicted on Conspiracy, Murder and Racketeering Charges

Paul Bergrin, a former Assistant United States Attorney with the U.S. Attorney's Office for the District of New Jersey and former state prosecutor for Essex County, New Jersey, pled guilty several weeks ago to misdemeanor charges for operating a call girl ring in Manhattan. Now, as reported in the New Jersey Law Journal, Bergrin was arraigned in federal court in Newark yesterday on charges of allegedly leading a racketeering conspiracy which arranged the murder of a witness in one case and attempted to have an informant killed in another case. Bergrin is charged with 14 counts including racketeering, racketeering conspiracy, conspiracy to murder a witness, murder of a witness, conspiracy to travel in aid of a racketeering enterprise, three counts of travel in aid of a racketeering enterprise, wire fraud conspiracy, and five counts of wire fraud.

The indictment charges Bergrin with arranging the murder of an informant who was expected to testify against Bergrin's client in a federal drug case. The witness, who was known as "Kemo," was shot in the head on a Newark street corner on March 2, 2004. Bergrin is also charged with attempting to hire a hitman from Chicago to kill an informant in another drug case. Bergrin traveled to Chicago and asked a hitman to murder a man identified as "Junior the Panamanian," who was expected to testify against Bergrin's client. The hitman turned out to be a federal informant, who notified authorities regarding Bergrin.

In addition, Bergrin is further charged with assuming control of his client's drug trafficking operation after the client was convicted, and to have bribed and threatened witnesses to provide favorable testimony. Four alleged co-conspirators are also charged, including Thomas Moran, an attorney who shared office space with Moran and helped to arrange one of the hitmen, who was actually a federal informant.

The indictment also charges Bergrin and others with involvement in a scheme to obtain more than $1.1 million in fraudulent mortgages on properties in Essex County through falsely inflating the values of the properties.

Bergrin was an AUSA from 1985 to 1990. He is being held in custody until a bail hearing next Tuesday. Bergrin is represented by Gerald Shargel, who also represents the infamous attorney turned felon Marc Dreier.

Two weeks ago, Bergrin pled guilty to running an escort service called NY Confidential, which offered services for $1,000 an hour, in New York State Supreme Court in Manhattan. He faced a sentence of 8 to 25 years, however the court sentenced him to three years probation and $50,000 in forfeiture.

Attorneys Charged With Knowledge of Agreement to Hide Text Messages Relating to Former Detroit Mayor's Affair

As reported in The National Law Journal, five attorneys were brought up on misconduct charges by the Michigan Attorney Grievance Commission yesterday for their alleged knowledge of a secret $8.4 million settlement to hide text messages which showed that Kilpatrick lied under oath in a police whistleblower trial regarding whether former Mayor of Detroit Kwame Kilpatrick had an affair with an aide. The lawyers are charged with failure to inform the court.

Kilpatrick resigned on September 18 after pleading guilty to an obstruction of justice charge for supposedly shoving a detective attempting to serve a subpoena on his sister. He has been placed on 5 years probation and ordered to pay $1 million in restitution to the City. The Commission conducted a 14 month investigation into the attorneys' conduct. Hearings have been scheduled for July 8 to 14. The attorneys face possible suspension or revocation of their law licenses.


Arkansas Attorney to Plead Guilty to Charges of Taking $9.3 Million from Trust Account

As reported by the Wall Street Journal yesterday, Little Rock Arkansas attorney Gene Cauley has agreed to plead guilty to wire fraud and criminal contempt charges in federal court in New York. Cauley was entrusted with a $65.9 million settlement from a class action lawsuit in 2006. The settlement proceeds were wired to an escrow account at Centennial Bank in Little Rock around August, 2007. On December 3, the court issued an order to distribute the class action settlement to the plaintiffs. Cauley has failed to produce the last $9.3 million of the settlement.

In an April 20 hearing in New York, Cauley, through his attorney John Wesley Hall, Jr., invoked his Fifth Amendment privilege against self-incrimination when asked where the money was by U.S. District Judge Jed S. Rakoff. There is no evidence that Cauley put the $9.3 million in his trust account. The principle, and the interest from it, would have belonged to the clients. Cauley was the sole signatory on the account. Judge Rakoff stated that Cauley may have committed criminal acts and disbarrable conduct. Mr. Hall informed the court that the $9.3 million could not be liquidated, although he indicated that the money could be made available in 90 days.

On May 9, in a filing with the Arkansas Supreme Court, Cauley announced that he would relinquish his law license and plead guilty. He has signed a plea agreement which will be heard on June 1.

In October and November of last year year, Cauley sold more than $10 million worth of stock in Home BancShares Inc. of Conway, despite the fact that Cauley was a director of the corporation. The quick sale is speculated to have cost Cauley between $50,000 and $80,000 at a time when he needed money.

Cauley faces a maximum sentence of ten years imprisonment on the charges.


Justice Souter on Criminal Law, Part II


Our summary retrospective of Justice Souter’s contributions to the Supreme Court’s criminal law jurisprudence continues. In addition to writing for the majority in many important criminal decisions, Justice Souter has authored concurring decisions in many cases, including criminal cases. While the Justice’s concurrences in criminal cases have typically been brief, Justice Souter has frequently raised important alternative views on issues on which he disagrees with the majority, or raises issues which the majority has overlooked.

Most recently, in Gall v. U.S., 128 S.Ct. 586 (2007) Justice Souter authored a concurring opinion in which he expressed his view that the best resolution of the tension between the Sixth Amendment right to trial by jury and consistency in sentencing was for Congress to enact a new statutory system of mandatory sentencing guidelines which provide for jury findings on all facts necessary to set the upper range of sentencing discretion. Justice Souter also concurred with the majority in U.S. v. Knights, 534 U.S. 112 (2001), in which the majority held that no more than reasonable suspicion was required to support a warrantless search of a probationer’s apartment, reserving the question of whether the Court’s holding in Whren v. U.S., 517 U.S. 806 (1996) that the subjective intentions of investigating officers play no role in searches based upon probable cause should also extend to searches based upon reasonable suspicion. In Illinois v. McArthur, 531 U.S. 326 (2001), the majority of the Court held that police officers preventing the petitioner from entering his home unaccompanied by an officer for about two hours while the officers obtained a warrant to search the home constituted a reasonable seizure of the premises pursuant to the Fourth Amendment. Justice Souter joined the majority in a concurring opinion in which the Justice observed that the exigent circumstances created by the risk that the defendant would have destroyed the illegal drugs stashed on the property would have justified a warrantless search of the premises by the police. In his concurrence in Florida v. White, 526 U.S. 559 (1999), which involved the warrantless seizure of an automobile from a public place by police as contraband under Florida’s contraband forfeiture law, Justice Souter took issue with the majority’s holdings to the extent that they endorsed the warrantless seizure of anything alleged to be “contraband,” holding that “[t]he Fourth Amendment does not concede any talismanic significance to use of the term ‘contraband’ whenever a legislature may resort to a novel forfeiture sanction in the interest of law enforcement, as legislatures are evincing increasing ingenuity in doing…” (citing Bennis v. Michigan, 516 U.S. 442, 443-446, 458 (1996); U.S. v. James Daniel Good Real Property, 510 U.S. 43, 81-82 & n. 1 (1993) (Thomas, J., concurring in part and dissenting in part)). And in Carlisle v. U.S., 517 U.S. 416 (1996), Justice Souter disagreed with the majority opinion that a district court possesses inherent authority to grant a motion for a judgment of acquittal, observing that Congress might possess the power to abrogate courts’ inherent authority legislatively, citing Federal Rule of Criminal Procedure 29(c).


Justice Souter on Criminal Law


            Supreme Court Justice David Hackett Souter has announced his intention to retire at the end of the Court’s term in June. In his 19 years on the Court, Justice Souter has been a key vote in many cases and has written over 150 majority, plurality, concurring and dissenting opinions, including in many criminal cases. In the area of criminal law, Justice Souter has issued numerous opinions fairly consistently advancing the rights of defendants at all stages of criminal proceedings. Federal Criminal Defense Blog salutes Justice Souter and his highly distinguished tenure on the Court by listing some of his significant opinions in the criminal arena, beginning today with majority and plurality opinions.

            Criminal defense attorneys everywhere will be familiar with Kyles v. Whitley, 514 U.S. 419 (1995) in which the Court, in an opinion delivered by Justice Souter, reversed the defendant’s conviction and held that a state prosecutor has a duty to learn of any favorable evidence known to the others acting on the government's behalf in the case, including the police, and has a duty to turn over all exculpatory evidence to the defense, pursuant to  Brady v. Maryland, 373 U.S. 83 (1963). And in Missouri v. Seibert, 542 U.S. 600 (2004), Justice Souter authored a majority opinion holding that warnings pursuant to Miranda v. Arizona, 384 U.S. 436 (1966) given to a defendant in the middle of an interrogation are ineffective and any statements given during the interrogation are inadmissible. And in Corley v. U.S., 129 S.Ct. 1558 (2009) discussed on this Blog, Justice Souter delivered the majority’s opinion that 18 U.S.C. § 3501 does not alter the rule that confessions made during periods of detention which violate the prompt presentment requirements of Federal Rule of Criminal Procedure 5(a) are inadmissible pursuant to the rule of McNabb v. United States, 318 U.S. 332 (1943) and Mallory v. United States, 354 U.S. 449 (1957).

            Justice Souter had Georgia on his mind early in his career on the Court when he delivered the unanimous opinion for the Court in Ford v. Georgia, 498 U.S. 411 (1991), in which the majority held that the Georgia Supreme Court erred in concluding that the petitioner’s claim pursuant to Batson v. Kentucky, 476 U.S. 79 (1986), which prohibits racially-based exercise of peremptory challenges by the prosecution, was untimely pursuant to State v. Sparks, 257 Ga. 97, 98, 355 S.E.2d 658, 659 (1987), in which the Georgia Supreme Court held that a Batson objection must be made within the period of the jurors’ selection and the administration of their oaths, because the Sparks rule was not “firmly established and regularly followed” at the time of the petitioner’s trial. In Wade v. U.S., 504 U.S. 181 (1992), Justice Souter, again writing for a unanimous Court, held that federal district courts have the authority to review the government’s refusal to file a substantial-assistance motion and to grant a remedy if they find that the refusal was based on an unconstitutional motive. Justice Souter authored the majority opinion in Old Chief v. U.S., 519 U.S. 172 (1997), in which the Court reversed the petitioner’s conviction for  possession of a firearm by anyone with a prior felony conviction in violation of 18 U.S.C. § 922(g)(1), holding that a district court abuses its discretion where it refuses a defendant’s offer to concede a prior judgment under Federal Rule of Evidence 403 and admits the full judgment over the defendant’s objection. In Shepard v. U.S., 544 U.S. 13 (2005) he wrote a majority opinion holding that in applying the Armed Career Criminal Act, 18 U.S.C.A. § 924(e), a sentencing courtcannot look to police reports or complaint applications to determine whether an earlier guilty plea necessarily admits, and supports a conviction for, generic burglary. Justice Souter wrote the majority’s holding in Watson v. U.S., 128 S.Ct. 579 (2007) that a person who trades drugs for a gun does not receive the gun in violation of 18 U.S.C. § 924(c)(1)(A), which provides for a mandatory minimum sentence where a defendant uses a firearm during a drug trafficking crime.

            Less pro-defense, Justice Souter authored the majority opinion in U.S. v. Wells, 519 U.S. 482 (1997) which held that material of falsehood was not an element of making false statements to a federally insured bank under 18 U.S.C. § 1014. And he rejected the petitioner’s arguments that 18 U.S.C. § 666(a)(2), which proscribes bribery of State and local officials of entities, was unconstitutional because of a lack of any jurisdictional requirement of a connection to federal money in Sabri v. U.S., 541 U.S. 600 (2004), holding that the statute was an instance of necessary and proper legislation.


This Week's Homegrown Ponzi Scheme

Yet another Ponzi scheme has surfaced in Georgia. As reported by the Macon telegraph his past Tuesday, U.S. marshals in Denver arrested Gary Hutcheson and Saundra McKinney Pyles of Macon. Hutcheson and Pyles had been indicted on April 22 in the U.S. District Court for the Middle District of Georgia on five counts of mail fraud and five counts of money laundering for running a fraudulent investment operation. The Indictment alleges that, beginning in 2006, Hutcheson operated a business named Georgia Ionics Fund LLC, which used two securities brokers, CyberTrade Inc. and Cobra Trading, to handle investments. Hutcheson is alleged to have advertised a hedge fund and claimed to have investment expertise and successes, which was false. Hutcheson attracted more than $2.1 million from investors, and invested only $780,000 of the money, the majority of which was lost. He kept approximately $1.3 million. Hutcheson further falsely represented to investors that the fund was completely successful. He and Pyles paid $457,000 of the funds to certain investors, falsely claiming that the funds constituted investment profits. Hutcheson and Pyles are awaiting extradition back to Georgia.


Happy Birthday to the Bard

A character in William Shakespeare’s Henry VI, Part II, famously exclaims ''The first thing we do, let’s kill allthe lawyers.'' Act 4, sc. 2. Well, April 26 is the anniversary of Shakespeare birth. And apparently judges and lawyers down the ages have had a far higher opinion of Shakespeare than he may have had of them, for Shakespeare, the most quoted source in the English language after the Bible, has had his works quoted in thousands of reported decisions. The Eleventh Circuit Court of Appeals has been no exception to this admiration, taking seeming great pleasure in working the occasional Shakespearean quotation into a decision. Some gems: “More important, when we do construe the various ADEA sections together, abrogation never becomes ‘as clear as is the summer’s sun.’” Kimel v. State Bd. of Regents, 139 F.3d 1426, 1431 (11th Cir. 1998) (quoting Henry V, act 1, sc. 2). “[W]here th’ offense is, let the great axe fall.” Floyd v. Waiters, 133 F.3d 786, 790 n.6 (11 Cir. 1998) (quoting Hamlet, act 4, sc. 5). “Indeed, this entire case turns on the issue of ripeness: ‘Ripeness is all.’ William Shakespeare, King Lear, Act V, Scene II, Line 9. We need not decide whether King Lear was referring to plantains or bananas.” Banana Services, Inc. v. M/V Fleetwave, 911 F.2d 519, 520 n.2 (11th Cir. 1990). “We have come, or gone, a long way from Shakespeare's ancient caution, ‘Neither a borrower, nor a lender be.’” Williams v. Public Finance Corp., 598 F.2d 349 (5th Cir. 1979).

A happy birthday from Federal Criminal Defense Blog to the Bard, who will undoubtedly continue to be quoted in legal opinions long, long after we here have shuffled off our mortal coils.

Summary of Substantial Eleventh Circuit Criminal Decisions Through April 8

            Resuming Federal Criminal Defense Blog’s pledge to keep readers informed regarding substantial decisions in the Eleventh Circuit Court of Appeals (and the Court certainly keeps us busy), we take this opportunity to catch up. Following is a summary of substantial decisions from the end of March through April 8.

“Violent Felonies” Under the Armed Career Criminal Act, 18 U.S.C. § 924: In U.S. v. Townsley, No. 08-13517, 2009 WL 929986, (11th Cir., Apr. 08, 2009) (per curiam; unpublished), the Court reversed the defendant’s conviction, holding that the district court erred in counting the defendant’s three previous convictions for carrying a concealed firearm, in violation of Fla. Stat. § 790.01(2), as “violent felonies” pursuant to the Armed Career Criminal Act (“ACCA”), 18 U.S.C. § 924(e)(1), following its decision U.S. v. Archer, 531 F.3d 1347 (11th Cir. 2008), id. at *3.

Sentence Not “Too Lenient”: The Court affirmed the defendant’s sentence for pedophilia in the published opinion U.S. v. Irey, No. 08-10997, 2009 WL 806860, (11th Cir., Mar. 30, 2009), rejecting the government’s argument that the defendant’s sentence was “too lenient” and therefore unreasonable, id. at *4. Reaffirming earlier holdings that an appellate court must not substitute its judgment for that of the sentencing court, id. at *2 (citing U.S. v. Melvin, 187 F.3d 1316, 1323 (11th Cir.1999); Williams v. U.S., 503 U.S. 193, 204, 112 S.Ct. 1112 (1992)), the opinion, authored by Chief Circuit Judge Edmondson, contains potentially useful language for the practitioner regarding the gravity of punishment and a defendant’s characteristics:

       We appreciate that some people may feel that no sentence would be too harsh for this crime. But that is not the law. And courts never should see the imprisonment in this country of a person for 17-1/2 years as light punishment: although even longer terms of imprisonment can be lawfully imposed in cases, this many years is a substantial portion of a human life-and no serious person should regard it as a trifle.

      Furthermore, when the defendant is 50 at the time the sentence is imposed, the consequences must be seen as severe. Moreover, upon Defendant’s release from imprisonment, he will not be free in the way that most Americans are free. He will be subject to rigorous conditions of supervised release by federal authorities. Given the terms of his sentence, never will Defendant be a truly free man again.

Id. at *4.

Presentence Reports: The Court in U.S. v. Martinez, No. 08-14926, 2009 WL 839093 (11th Cir., Apr. 01, 2009) (per curiam; unpublished) observed that Federal Rule of Criminal Procedure 32(i)(1)(A) requires a district court to verify at sentencing “that the defendant and the defendant’s attorney have read and discussed the presentence report and any addendum to the report,” id. at *2 (quoting Fed.R.Crim.P. 32(i)(1)(A)), while Rule 32(i)(4)(A)(ii) requires the district court to “address the defendant personally… in order to permit the defendant to speak or present any information to mitigate the sentence,” id. (quoting Fed.R.Crim.P. 32(i)(4)(A)(ii)). The Court held that the drafters of Rule 32 “did not intend to impose a requirement that the district court personally address the defendant when inquiring whether he and his attorney have read and discussed the PSI.” Id. (citing U.S. v. Aleman, 832 F.2d 142, 144 (11th Cir. 1987)). The Court also rejected the defendant’s argument that the district court failed to properly address his statement at sentencing that he wished to “go to trial.” Id. at *4.

Government’s Breach of Plea Agreements: “‘Efforts by the Government to provide relevant factual information or to correct misstatements are not tantamount to taking a position on the sentence and will not violate [a] plea agreement.’” U.S. v. Matisas Mesa, No. 08-14134, 08-14130, 2009 WL 868012, *2 (11th Cir., Apr. 02, 2009) (quoting U.S. v. Block, 660 F.2d 1086, 1090-91 (5th Cir. Unit B Nov. 1981)). “‘A prosecutor has a duty to insure that the court has complete and accurate information concerning the defendant...’” Id. (quoting Block, at 1091). Thus, the government’s informing the sentencing court of the defendants’ inconsistent statements in Matisas Mesa, which resulted in the court’s denial of safety-valve treatment pursuant to U.S.S.G. § 5C1.2(a)(5), was held by the Court not to violate the defendants’ plea agreement in which the government agreed to recommend safety-valve treatment. Id.

Booker is a Two-Way Street: In U.S. v. Beasley, No. 08-14977, 2009 WL 905103 (11th Cir., 2009) (per curiam; unpublished), the Eleventh Circuit held that, even if the sentencing court did not use evidence of three uncharged bank robberies in which the defendant was implicated as “relevant conduct” to enhance his sentence pursuant to U.S.S.G. § 1B1.3, “§ 1B1.3 did not limit the court's discretion to consider the robberies under [18 U.S.C.] § 3661 and [18 U.S.C. §] 3553(a),” id. at *2, in departing upward from the Guidelines range, id. at *2.

Hearsay (Not): In U.S. v. Jiminez, No. 08-14192, 2009 WL 921437, (11th Cir., Apr. 07, 2009), the Eleventh Circuit affirmed the defendant’s conviction on various charges concerning manufacture and distribution of marijuana plants, holding in the process that the district court’s admission of testimony by a police detective regarding a statement by a non-testifying witness that the defendant was involved in a marijuana growing operation was not inadmissible hearsay, finding that the statement was not hearsay since it was not admitted to prove the truth of the matter asserted, but only the fact that it was made, pursuant to Federal Rule of Evidence 801(c), id. at *5.

 “National Standard of Care” and “Red Flags” in Prescription Prosecution: When a doctor is prosecuted under the Controlled Substances Act (“CSA”), 21 U.S.C. § 841 for prescribing drugs to patients, he or she must show that they acted in good faith and for a legitimate medical purpose. See U.S. v. Johnston, No. 08-14594, 2009 WL 806740, *4 (11th Cir., Mar. 30, 2009) (per curiam; unpublished) (citing U.S. v. Merrill, 513 F.3d 1293, 1301-02 (11th Cir. 2008)). In Johnston, the district court instructed the jury that it should apply a “national” standard of care in determining whether there was a legitimate medical purpose for the defendant physician’s prescriptions. Id.  The defendant argued on appeal that Florida’s standard of care should govern. Id. The Eleventh Circuit held that the defendant had invited the error by previously arguing that jury must find that she acted “outside the course/scope of professional practice, not in accordance with a standard of medical practice generally recognized and acted in the, in order to convict her, id. (Emphasis in original). The Court affirmed the defendant’s conviction, also holding that admission of testimony from witnesses for the government regarding “red flags” for detecting drug abuse in patients was not plain error and was admissible pursuant to Fed.R.Evid. (“Rule”) 702. Id. at *6.

Fear, Loathing and Interstate Extortion: A feud between German immigrants resulted in charges of conspiracy and extortion in violation of the Hobbs Act, 18 U.S.C. § 1951, and the Travel Act, 18 U.S.C. § 1952, in U.S. v. Bornscheuer, NO. 07-10009, 06-14607, 2009 WL 814587 (11th Cir., Mar. 31, 2009). The Eleventh Circuit affirmed the defendants’ convictions, simultaneously reaffirming its holding in U.S. v. Grassi, 783 F.2d 1572 (11th Cir. 1986) that a component of extortion for the purposes of the Hobbs Act is the victim’s fearful state of mind, and that “fear” is “‘a state of anxious concern, alarm or apprehension of harm and it includes fear of economic loss as well as fear of physical violence.’” Id. at *6 (quoting Grassi, at 1577).

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As Economy Slumps, Fraud Is on the Rise, Including in Georgia

An article on Easter Sunday in the Atlanta Journal Constitution states what most readers will probably guess—that the gloom of the economy and financial desperation are fueling an increase in cases of fraud. The article notes that Ponzi schemes, mortgage fraud and other frauds have increased nationwide as well as in Georgia. It relates some recent noteworthy frauds in the State:

  • Georgia’s “Bernie Madoff,” Wendell Ray Spell, who bilked investors out of $60 million in a Ponzi scheme involving financing of construction equipment;
  • CRE Capital, an Alpharetta firm which purported to pay investors 10 percent a month from trading U.S. and Japanese currencies, but which turned out to be a Ponzi scheme which defrauded at least 120 investors of more than $28 million. CRE’s President James G. Ossie was indicted in January in the Northern District of Georgia on 10 counts of wire fraud;
  • Woodstock, Georgia, real estate agent Joseph S. Jetton was sentenced last year to 14 years in prison and ordered to pay $11.2 million in restitution for mortgage fraud; and
  • Georgianne Carlisle, a former insurance company executive from Taylorsville, Georgia, pled guilty last week to embezzling $1.2 million in insurance premiums.

The article references FBI statistics, which relates that pending federal prosecutions for fraud more than doubled from 279 in 2003 to 529 in 2007, and that embezzlement arrests jumped by more than a third over the same period to more than 22,000. It quotes sources claiming that Atlanta is a hot spot for mortgage fraud. Katherine Addleman, Director of the Securities and Exchange Commission’s Atlanta regional office, is quoted as stating that the worsening economy actually serves to expose frauds, since the fraudulent schemes run out of money. The FBI’s most recent Preliminary Semiannual Uniform Crime Report for January to June 2008 showed the rate of larceny-theft down 1.2 percent nationwide, but with an increase of .5 percent in the Southeast. These numbers likely have increased and will undoubtedly increase further if financial desperation from the declining state of the economy grows.

Georgia's "Bernie Madoff"--Wendell Ray Spell--Pleads Guilty to $60 Million Fraud

While the Bernard Madoff scandal has seized national headlines, the guilty plea of Georgia’s own, homegrown Bernie Madoff, Wendell Ray Spell, of Gainesville, has passed relatively quietly. As announced by the U.S. Attorney’s Office for the Northern District of Georgia, Spell pled guilty last week in the Northern District of Georgia to a criminal information containing one count of mail fraud. Spell bought and sold construction equipment, doing business under the names of North Georgia Equipment Sales, LLC and Cornerstone International Investments, LLC. Spell’s business faltered, and in order to keep it afloat, Spell obtained funds from investors to allegedly purchase additional equipment by falsely informing investors that he could re-sell the equipment for a substantial profit. Spell would promise investors that he would split the profits from the re-sale of the equipment with them 50/50, or that he would pay them 36% interest annually. Spell deceived investors into believing that he had purchased equipment by preparing counterfeit bills of sale and other documents, in an extensive Ponzi-style fraud.

In this manner, Spell obtained more than $60 million from more than 50 investors in Gainesville and elsewhere. Spell used the investment proceeds to pay “phantom” profits to investors, to pay his personal expenses and to purchase real and personal property for himself and his family.

Spell’s sentencing date has not yet been set, but he faces as much as 20 years incarceration and a fine of up to $250,000.

As reported by the Gainesville Times, Spell was released on a $25,000 unsecured bond pending sentencing. The government has filed forfeiture claims on 10 pieces of heavy equipment owned by Spell. At least 18 “investors” in the Gainesville area have filed suit against Spell.

Eleventh Circuit Affirms Downward Departure in Gruesome Child Pornography Case

On Monday, the Eleventh Circuit, with a pretty tough panel (Chief Judge Edmondson, and Judges Tjoflat and Hill) affirmed a below guidelines sentence in United States v. Irey, Case No. 08-10997, in what is described in the opinion as an “utterly gruesome” case of using minors to engage in sexually explicit conduct outside of the United States for the purpose of transmitting those images into the United States in violation of 18 U.S.C. 2251(c). The government appealed a sentence of 210 months imposed on the 50 year old defendant, essentially arguing that the sentence was too lenient.

Chief Judge Edmondson held that although the guidelines called for an offense level of 43 and a guideline sentence of 360 months that the district court’s downward departure to 210 months was “within the outside borders of reasonable sentences for this case.”

Judge Hill is a special concurrence noted that he agreed that the district court did not abuse his discretion in sentencing this defendant, although he noted that he disagreed with the district court because “the defendant acted deliberately, cunningly, and with obvious delight. He ruined the lives of a least forty-three children (that we know of) and then published his triumphs on the internet for all the world to see, complete with the scurrilous black marker writings tattooed on the nine-year-old girls’ skin.”

Interestingly, the district court departed downward, apparently persuaded that the defendant suffered from some illness.

What is fascinating here is that Chief Judge Edmondson acknowledges that “some people may feel that no sentence would be too harsh for this crime. But that is not the law.” And, Judge Hill, in his concurrence has a beautiful statement that goes to the heart of our legal system that we are a nation of laws, not of men. He writes, “I am persuaded that the sentencing in this case is not a proper one. However, I am more dedicated to my strong belief that district judges ‘on the firing line’ should have free rein to exercise sentencing discretion. Therefore, I am unwilling to say that the fact that I disagree with the sentence in this case is also sufficient grounds upon which to find abuse. I reluctantly concur.”

This case stands in stark contrast to the Eleventh Circuit decision in Pugh, discussed here, and, quite frankly, can not be reconciled.


Summary of Eleventh Circuit Criminal Opinions, Week of March 17, 2009

Our apologies for playing catch-up, but our summary of the primary, meaningful criminal opinions by the Eleventh Circuit will continue this week. Following is a summary of the decisions for the week of March 17, 2009.

In Salazar v. U.S., No. 07-13715, 2009 WL 684772 (11th Cir., Mar. 17, 2009), the Eleventh Circuit reversed the district court’s denial of the defendant’s motion pursuant to 28 U.S.C. § 2255 to vacate his sentence for possessing with the intent to distribute crack cocaine based upon ineffective assistance of counsel, where defendant’s counsel failed to call as witnesses at trial two persons who could have corroborated that the defendant denied possessing any cocaine at the time of his arrest, id. at *2.

The Court affirmed the district court’s denial of a reduction under the safety-valve provision pursuant to U.S.S.G. § 5C1.2 for a defendant convicted of conspiracy to manufacture and possess with intent to distribute marijuana plants in U.S. v. Cruz, No. 08-11625, 2009 WL 684789 (11th Cir., Mar. 17, 2009), observing that the defendant’s refusal to testify at sentencing left the district court with little ability to access his credibility and the defendant had failed to carry his burden, id. at *2.

In U.S. v. Valdex, No. 07-14721, 2009 WL 684751 (11th Cir., Mar. 17, 2009), the Court held that the defendant in a prosecution for health care fraud “invited” any error in calculating the amount of loss under U.S.S.G. § 2B1.1 by urging the trial court to adopt the amount of loss contained in the presentence report, id. at 1. It also held that the trial court did not clearly err in applying a sophisticated means enhancement under U.S.S.G. § 2B1.1(b)(9)(C) where the defendant “recruited beneficiaries and sought out doctors so as to aid in hiding the illegality of his Medicare claims, and converted [a corporation] into a pharmacy through which he continued to defraud Medicare…” Id. The Court also held that the defendant’s sentence was within the Sentencing Guidelines range and therefore substantively reasonable, pursuant to U.S. v. Talley, 431 F.3d 784, 788 (11th Cir. 2005), and that “relevant uncharged or acquitted conduct may be taken into account in sentencing, as long as such conduct is proven by a preponderance of the evidence and the court clearly applied the Guidelines as advisory.” Id. (citing U.S. v. Faust, 456 F.3d 1342, 1347-48 (11th Cir. 2006)).

The Court affirmed the defendant’s above-Guidelines sentence for travel with intent to engage in a sexual act with a juvenile in U.S. v. Smith, No. 08-11665, 2009 WL 693342 (11th Cir., March 18, 2009), noting that the district court could upwardly depart in sentencing the defendant based upon violations of the defendant’s supervised release, pursuant to U.S.S.G. § 7B1.4, comment. (n.3), id. at *2.

            In U.S. v. Whitehead, No. 08-13201, 2009 WL 691184 (11th Cir., Mar. 18, 2009), the Court affirmed the denial of the motion for a sentencing reduction, brought pursuant to 18 U.S.C. § 3582(c)(2) of the defendant, who was convicted of various drug and crack cocaine offenses, holding that the Sentencing Commission’s Amendment 706 to U.S.S.G. § 2D1.1(c) in November 2007, which provided a two-level reduction in base offense levels for certain crack-cocaine offenses, did not affect the guideline ranges of defendants who were sentenced as career offenders under U.S.S.G. § 4B1.1, id. at *3 (citing U.S. v. Moore, 541 F.3d 1323, 1330 (11th Cir. 2008)). The Court also held that the defendant was ineligible for the reduction despite the fact that he had been granted a downward departure pursuant to U.S.S.G. § 4A1.3, observing that “[t]he critical fact… is that the district court used the offense level from the career offender guideline to calculate [the defendant’s] applicable guideline range,” rather than § 2D1.1. Id. at *4.

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Clifford Harris, also known as Rapper T.I. Sentenced to a Year and a Day

Yesterday, Clifford Harris, aka, “Rapper T.I.”, was sentenced in the Northern District of Georgia to a year and a day for being a felon in possession of machine guns, silencers and other weapons, when the district court accepted a binding plea agreement brokered by defense counsel and U.S. Attorney David Nahmias. Although defense counsel should be commended for their outstanding representation of Mr. Harris, this case puts to rest and substantially undermines the goal of equal justice.

When Harris was arrested by ATF Agents in October 2007, Nahmais, in his press release held forth that, “The last place machine guns should be is in the hands of a convicted felon . . . thanks to the good and quick work of the ATF he is now in custody . . .”

By way of background, Harris entered his plea a year ago, and the plea agreement called for, among others things, Harris to perform community service of 1500 hours. The plea agreement noted that the Court could impose a custodial sentence of fifty-seven (57) months to ninety-seven (97) months, if the agreement were violated.

The factual basis attached the plea agreement noted that:

  • During September and October of 2007, one of Harris'bodyguards purchased nine (9) firearms for him and that Harris placed some or all in a hidden compartment (which was secured by a biometric lock, which required Harris’s fingerprint to gain access) inside a closet in Harris' bedroom.
  • On October 10, 2007, Harris arranged for this same bodyguard to pick up $12,000 in cash from the Defendant’s bank account at SunTrust Bank. The Defendant told the bodyguard to use the cash to buy machine guns for the Defendant.
  • On October 10, 2007, the bodyguard purchased three machine guns for the Defendant, and also bought two silencers to deliver to the Defendant, from an undercover ATF agent.
  • During the search of Harris’ Range Rover incident to the Defendant's arrest, ATF agents found three firearms.

Rapper T.I., who according to court documents was a twice convicted felon prior to this case, doesn’t seem to me to be the appropriate candidate for someone who should be parading around the nation giving talks to the under privileged youth of America about the perils of guns and drugs in our society. Call me crazy, but a three time convicted felon, who was purchasing machine guns and silencers and whose gun safe had a “biometric” lock on it, just doesn’t strike me as someone’s words that ring true. It would be one thing, if it were a first offense. It would be one thing, if it were a single handgun truly for protection, but this case really does throw out the window the notion of equal justice. In my opinion, the United States Attorney’s Office for the Northern District of Georgia, and particularly, U.S. Attorney David Nahmias, failed in the fair administration of justice.

Summary of Eleventh Circuit Criminal Opinions, Week of March 9, 2009

            As part of a new, ongoing weekly feature, following are summaries of relevant criminal decisions by the Eleventh Circuit Court of Appeals for the previous week. Only substantive opinions by the Court discussing criminal law will be covered—summary opinions and orders will not be listed.

In U.S. v. Watley, NO. 08-11768, 2009 WL 635185 (11th Cir., Mar. 13, 2009), a prosecution of the defendant for drug and firearm offenses, the Court affirmed the trial court’s admission of evidence of prior controlled drug buys not charged in the indictment, relying on the rule that “‘[e]vidence of criminal activity other than the charged offense is not extrinsic under [Federal Rule of Evidence] 404(b) if it is... necessary to complete the story of the crime, or [ ] inextricably intertwined with the evidence regarding the charged offense,’” id. at *2 (quoting U.S. v. Wright, 392 F.3d 1269, 1276 (11th Cir. 2004)). The Court also held that the district court did not abuse its discretion in refusing to compel disclosure of the identity of a confidential informant to the defense, finding that the CI was not involved in the events underlying the charges against the defendant, and that the CI’s proposed testimony would have harmed, rather than helped, the defendant. Id. at *3.

The Court in U.S. v. Strachan, No. 08-13949, 2009 WL 641225 (11th Cir., Mar. 13, 2009), held that it was not required to dismiss the defendant’s appeal of his sentence for various drug and firearms offenses despite a sentence appeal waiver in the defendant’s plea agreement where the record contained no transcript of the plea hearing and did not indicate that the defendant “clearly understood the consequences of his sentence appeal waiver,” id. at * 2. The Court proceeded to find that the district court did not discuss any of the sentencing factors under 18 U.S.C. § 3553(a) at sentencing and vacated the case and remanded for resentencing, observing that a sentencing court “‘need not make detailed findings with respect to each § 3553(a) factor, but the record must make it clear that it considered them.’” Id. at *2 (quoting U.S. v. Williams, No. 08-11361, at 5-7 (11th Cir. Feb. 9, 2009); U.S. v. Eggersdorf, 126 F.3d 1318, 1322 (11th Cir. 1997)).

Gillen Withers & Lake LLC have several of the most aggressive and successful criminal defense attorneys in Georgia and the Southeast, with national reputations, focusing on  federal and state white collar and corporate criminal litigation. Call Thomas Withers in Savannah (912) 447-8400 or Craig Gillen in Atlanta (404) 842-9700.

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Georgia Takes On Counterfeit Goods

Georgia will seek to stop the flood of counterfeit goods, including cigarettes, clothing and movies, flowing into the State, according to an address by Georgia Attorney General Thurbert Baker  to members of the Georgia and U.S. Chambers of Commerce yesterday, as reported by the Atlanta Journal and Constitution. Profits from the counterfeited items are alleged to go to gangs, international fraud rings and even terrorist organizations. Baker stated that he has assigned a Senior Assistant Attorney General to coordinate enforcement efforts with local prosecutors and law enforcement.

A poll commissioned by the U.S. Chamber of Commerce shows that 18% of individuals questioned in the metro Atlanta area said that they had knowingly bought counterfeit goods within the past year, and over 40% of respondents under the age of 25 admitted to doing so.

Sale of counterfeit brand name products is estimated to be a $100 billion annual industry, according to one source. Approximately 45% of fake merchandise in the U.S. comes from China, the largest producer of counterfeit goods. It is estimated that 10 to 12% of all sporting goods purchased are fake, as well as 13% of entertainment media, 10% of wristwatches, as well as significant amounts of batteries, cigarettes, sunglasses and computer hardware. Trafficking in counterfeit goods is prohibited under federal law, 18 U.S.C. § 2320.


$13 Million Escrow Fraud Scheme Indicted

Edgar Beaudreault, Howard Sperling and Robert Surles were indicted for fraud by a grand jury in the United States District Court for the Northern District of Georgia last week. Beaudreault, Sperling and Surles are alleged to have conspired to defraud Cornell Corrections of California, Inc., a private company which operates correctional facilities for governmental units. Specifically, the defendants are alleged to have induced Cornell Corrections to transfer $13 million, which was to be used to purchase a correctional facility being constructed in Canon City, Colorado and which was to be held in escrow, to an account in Atlanta controlled by the defendants by representing to Cornell Corrections that the account was controlled by a bank. The defendants are alleged to have subsequently transferred the $13 million to other accounts to use for their own purposes.


Tech Worker Gets 2.6 Years on Credit Card Charges

We have discussed former Georgia Tech worker Donna Gamble, who charged more than $316,000 on a state credit card. Today, as reported by the Atlanta Journal Constitution, the United States District Court for the Northern District of Georgia sentenced Gamble to 2.6 years imprisonment. The sentencing judge, United States District Judge Jack T. Camp characterized as "frivolous" Gamble's purchases on a card issued pursuant to the State's p-card program, which included waverunners, popcorn machines and Auburn University football tickets. In all, Gamble purchased a total of 3,800 items in 2,000 purchases, many made from her computer at the University. Gamble said nothing during the hearing and presented no witnesses on her behalf.

CDC Employees Sentenced for Bogus Bomb Threat

     In April of 2006, the Centers for Disease Control (CDC) in Atlanta received a telephone call from a caller with a blocked telephone number, who identified himself as a former employee of the CDC who had been fired and stated that a bomb had been placed in the CDC building. The DeKalb County Police Department were called and searched the building, but no explosive devices were found. Federal Bureau of Investigation agents interviewed the former employee, but determined that he had not made the call. However, their investigation led them to Quantavious Greene and Elijah Chandler, contract employees of the CDC. Greene and Chandler initially gave false statements to the agents, but Greene subsequently confessed that he had made the call on Chandler's urging so that Chandler could leave work early.
    Greene and Chandler were charged with aiding and abetting one another in making the false bomb threat. Greene pled guilty to the charge in November of last year, and Chandler followed suit in January of this year. They were sentenced this week by United States District Judge Orinda D. Evans to 4 and 6 months imprisonment respectively, followed by 3 years probation.

Another Home Depot Manager Pleads Guilty in Atlanta

A second Home Depot Manager, James P. Robinson, pleaded guilty in federal court in Atlanta on Friday to three counts of a criminal Information charging him with: 1) one count of conspiracy to commit mail and wire fraud while he was Divisional Merchandising Manager for flooring by taking hundreds of thousands of dollars in secret payoffs from Anthony Tesvich, a former Home Depot employee who has already pled guilty, and 2) two counts of tax evasion for failing to pay taxes on those secret payoffs. Robinson has also agreed to forfeit substantial properties, including real estate in Tennessee, a 2006 Infiniti SUV, a 2004 Cadillac Escalade and $146,000.00 in a bank account.

The charging document refers to another as yet uncharged co-conspirator and refers to other co-conspirators as well, so look for at least one more guilty plea to arise out of this investigation.

Robinson is scheduled to be sentenced on October 14, 2008, as is his co-defendant Tesvich.

Home Depot Employee Pleads Guilty in Massive Scheme

Anthony Tesvich, a former Home Depot employee, plead guilty in front of Judge Story in Atlanta on Monday to one count of conspiring to defraud Home Depot, and three counts of tax evasion. As part of his plea, Tesvich admitted to taking millions of dollars in secret payoffs from Home Depot vendors and failing to pay taxes on those kickbacks.

The lengthy Criminal Information, available here, alleges that Tesvich conspired with two other Home Depot employees, identified only as co-conspirators A and B, to obtain kickbacks from Home Depot suppliers through various front companies and then paid monies to his Home Depot co-conspirators for the purpose of concealing the receipt of those kickbacks.

Yesterday, July 2, Tesvich forfeited his interest in the following properties.

  • $465,999 .69 in proceeds from the consent sale of 90C Carriage Path, S .E ., Smyrna, Cobb County, Georgia;
  • 1E255 Mountain View Road, Desert Hot Springs, Riverside County, California, and all buildings and appurtenances thereon;
  • Twenty (20) Acres of Vacant Land, Parcel Number 657-270-023-6, Riverside County, California, and all buildings and appurtenances thereon;
  • 600 Schillinger Road N., Serrsnes, Mobile County, Alabama, and all buildings and appurtenances thereon;
  • 1916 Wildwood Place, Mobile, Mobile County, Alabama, and all buildings and appurtenances thereon; and
  • $122,971 .75 in proceeds from the consent sale of Lot 43, Heron Lakes, Phase T, Mobile, Mobile County, Alabama.

Tesvich, who is cooperating with the government will be sentenced on September 2, 2008. Based on the government filings to date, other cases will arise out of Tesvich’s cooperation.

Savannah Clinic Charged with $4.6 Million Medicare Fraud

    The United States Attorney's Office for the Southern District of Georgia has announced the indictment of Alfredo Rasco and Niurka Rasco of Miami, Florida, who operated a clinic called United Therapy in Savannah. The defendants are charged with 34 counts of health care fraud and aggravated identity theft. The indictment alleges that the Rascos, through United Therapy, provided infusion services to patients, but only administered a fraction of the medicines to patients, while billing Medicare for the full amount. The indictment further alleges that the defendants defrauded Medicare of more than $4.6 million between 2005 and 2008.

Supreme Court Curtails Money Laundering

I apologize for being away from the blogging world for the past 2 weeks, but the press of business has kept me too busy. There are many noteworthy developments in the blogosphere, but none more important to the criminal practitioner than the Supreme Court's decision yesterday on the landscape of money laundering.

The Supreme Court in United States v. Santos, -- S.Ct. --, 2008 WL 2229212, (available here) affirmed the Seventh Circuit in holding that the term “proceeds” in 18 U.S.C. § 1956 (a)(1) means “profits,” not “receipts.” Efrain Santos was found guilty of running an illegal lottery business in violation of 18 U.S.C. § 1955, and money laundering and conspiracy to commit money laundering in violation of 18 U.S.C. § 1956 (a)(1) and 18 U.S.C. § 1956 (h). He was sentenced to 60 months imprisonment for the illegal gambling charges and 210 months on the money laundering charges. Following affirmance on direct appeal, Santos filed a section 2255 motion to vacate his sentence, ultimately alleging in part, that that his payments to customers and collectors of his illegal operation did not constitute money laundering. United States v. Santos, 342 F.Supp.2d 781 (N.D. Ind. 2004). The district court granted Santos’ 2255 motion finding that Judge Easterbrook’s decision in United States v. Scialabba, 282 F.3d 475 (7th Cir. 2002), controlled, and that the “proceeds” of an illegal gambling business under 1956 means “net” proceeds, not the ongoing monies used to conduct the illegal business in the first place. That decision was affirmed on appeal. Santos v. United States, 461 F.3d 886 (7th Circuit 2006), and the government appealed to the Supreme Court.

            Justice Scalia writing for the majority held that “proceeds” under section 1956 means “profits,” not the ongoing “receipts” of the illegal business. Justice Scalia adds “a word concerning the stare decisis effect of JUSTICE STEVENS’ [concurring] opinion.” 2008 WL 2229212, * 10. Because Justice Stevens’ vote was necessary to the Court’s judgment, but since it rested on a narrower ground, the Santos opinion is, accordingly, limited. Therefore, so that there will be no mistake as to the meaning of his opinion, Justice Scalia stakes out the exact contours – “that ‘proceeds’ means ‘profits’ when there is no legislative history to the contrary.” Id.

            So, why is this opinion so important to us – because the government routinely uses money laundering to jack up a defendants’ sentence, if the defendant chooses to go to trial. Look at the effect on Santos – 60 months for gambling, but 210 months for money laundering. This decision  effects many former and current cases. We should be looking through our inventory of cases to see what meritorious 2255 motions lie therein.

Evidence of State Representative's Shady Dealings Spread

   Georgia State Representative Ron Sailor, Jr., who pled guilty to money laundering charges in the United States District Court for the Northern District of Georgia back in March for attempting to assist drug dealers in laundering hundreds of thousands of dollars worth of drug money, was also involved in suspect real estate deals. As the Atlanta Journal-Constitution reports, records have revealed that Mr. Lee Anderson, Sailor's wife's grandfather, purchased two duplexes in Macon, Georgia, from Sailor in 2005. Sailor  purchased the duplexes for $30,000 and sold them to Anderson 6 months later for $126,000.
   However, Anderson was actually a 101 year-old man who died last week and who lived on an isolated road in Mississippi and never set foot in the State of Georgia. Anderson's wife Ruby has stated that the couple had nothing to do with real estate, and that the signatures on the mortgage documents did not resemble Anderson's handwriting. Documents relating to the properties would be sent to the couple, and Sailor informed the couple that he would take care of it. The properties were eventually foreclosed on and sold.
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Georgia Tech Employee Pleads Guilty in P-Card Scheme

   Donna Rene Gamble was an employee of the Georgia Institute of Technology. As a Tech employee, Gamble had access to one or more Procurement Cards, or "P-Cards," which employees could use for official business purchases, but not personal purchases. However, over the course of five years, Gamble purchased more than 3,800 personal items with her P-Cards, totalling more than $316,000. Gamble then concealed her purchases by creating false receipts and making false entries in accounting records. The money spent by Gamble was grant money to Georgia Tech by the National Science Foundation.
   Gamble plead guilty on May 13 in the United States District Court for the Northern District of Georgia to 22 counts of mail fraud and theft from and organization receiving federal funds. She will be sentenced in July.

Former Coca Cola Employee's Conviction Affirmed

In an Opinion (available here) dated March 20, 2008, but released on Monday, May 12, the Eleventh Circuit affirmed the convictions and sentences of Joya Williams, a former Coca Cola employee, and one of her conspirators, Ibrahim Dimson.

After a lengthy factual recitation regarding this case which was prosecuted by the U.S. Attorneys Office in Atlanta and which involved the attempted sale of trade secrets by Williams and others to Pepsi, the Court found no error in the curtailed cross-examination of Williams’ co-conspirator since the cross-examination conducted extensively challenged the co-conspirator’s credibility.

In a more interesting challenge, and one that always seems to get the ear of the appellate courts, the defense contended that the district court improperly instructed the jury on the meaning of reasonable doubt by using an example “which had to do with open-heart surgery the judge had previously undergone.” Although the Eleventh Circuit doesn’t tell us more, the defense contended that the example amounted to unconstitutional burden shifting. When the example was given by the district court, he apparently informed the jury, following objection, to disregard his example, and gave the pattern reasonable doubt charge, which the jury is presumed to follow.

Finally, both Williams and Dimson challenged their sentences contending that the district court placed undue emphasis on one factor, the seriousness of the harm, and less weight on the other 3553 factors. In affirming the above-guideline sentences imposed, the Eleventh Circuit noted that, although U.S. v. Pugh, discussed at an earlier post here, provides that an unjustified reliance on a single 3553 factor might be a “symptom” of an unreasonable sentence, here the trial judge discussed several 3553 factors and the individual weight to be given to any one factor is within the trial judge’s discretion.

Both defendants challenged their sentences, 96 and 60 months respectively, based on the alleged unwarranted disparity with their cooperating co-defendant who received 24 months. The Eleventh Circuit cited the cooperation as a factor that plainly accounted for the different sentence and affirmed.

Ninth Circuit Affirms Dismissal for Prosecutorial Misconduct

In a fascinating case out of the District of Nevada, the Ninth Circuit (opinion available here, 2008 WL 1946744) has affirmed the district court’s dismissal of the indictment against three defendants who were charged in a 64 count indictment with, among other things, wire fraud, securities fraud, and money laundering. The government’s case revolved around what the Ninth Circuit described as a “box job” scheme where a small number of individuals control a corporation’s stock through strawmen officers, directors and shareholders. One of the core allegations was that the defendants allegedly made more than $12 million, which was laundered through the law firm of two of the defendants.

The Motion to Dismiss filed in the district court, available here, outlines a litany of what the district court called “unconscionable” conduct by the government that including Brady and discovery violations as follows: 1) failing to provide the defense with Jencks materials relating to the case agent, 2) failing to disclose the rap sheet and prior convictions of one of the government witnesses, 3) failing to produce notes a witness had provided to the investigating agent, 4) failing to disclose that the investigating agent had countenanced the continued unlawful activity of a cooperating witness, 5) failing to produce documents essential to the “box job” allegation, 6) failing to disclose memoranda that contradicted witness testimony, and 7) producing some 650 pages of documents, including rap sheets, during trial. The motion to dismiss was filed during the third week of trial. In declaring a mistrial, the district court noted that the AUSA in charge of the prosecution had acted “flagrantly, willfully, and in bad faith.” 2008 WL 1946744, *4.

In an excellent discussion of the applicable law dealing with dismissal of an indictment for prosecutorial misconduct and whether that ultimate sanction was required here, the Ninth Circuit, noted that the government even conceded that a mistrial was an appropriate remedy, for the government’s violations of “its constitutionally imposed discovery obligations.” Id., *12.  Both the district court and, apparently, the Ninth Circuit, were concerned that any sanction short of dismissal, would have countenanced the government's unlawful conduct.

Camden County Sheriff Being Investigated by Federal Grand Jury for Use of Convict Labor

     Bill Smith, Sheriff of Camden County, Georgia, is being investigated by a federal grand jury over his use of convict labor, as well as his use of seized drug monies and assets. Smith allegedly made Camden County inmates work on a private property on Cumberland Island which was slated to be used by the Shepherd Center, a nonprofit organization in Atlanta which treats spinal cord injuries. Smith’s son was paralyzed in 2003 in an automobile accident. The District Attorney for Camden County forwarded investigative materials in the case to the United States Attorney’s Office for the Northern District of Georgia in Atlanta. Several witnesses have been called before the grand jury this year. Continue Reading...

Soldiers Based in Georgia Charged with Arson and Attempting to Rob Drug Dealers

          Several soldiers stationed at Camp Frank D. Merrill in Dahlonega, Georgia, have been indicted in the United States District Court for the Northern District of Georgia. Sandeo Pablo Dyson, an Army Ranger, pled guilty last Thursday in the United States District Court for the Northern District of Georgia to burning down Club Onyx, an adult entertainment establishment on Cheshire Bridge Road in Atlanta. Dyson worked as director for security for Platinum 21, another adult club, which began to experience competition from Onyx for African-American clientele. Platinum 21’s management allegedly formulated a plan to burn down Onyx. He faces 5 years in prison.

            However, federal authorities’ investigation of the matter greatly expanded when Dyson told a confidential information that four other soldiers from Camp Merrill, some of whom, coincidentally, also worked security at Platinum 32, would be willing to rob a Mexican “stash house” for a cut of cocaine. This prompted an undercover Bureau of Alcohol Tobacco and Firearms agent to meet with Army Rangers Carlos Lopez, David Ray White and Randy Spivy, and Army medic Stefan Andre Champagne, and laid out a fictitious plan to hold up drug deals at a house in Atlanta and steal 25 kilograms of cocaine. The soldiers were arrested when they showed up at the house with their weapons, and face pending charges.

"Crown Royal Bandit" Bagged

    Georgia banks... and the Crown Royal Company of Norwalk, Connecticut... can breathe a little easier today. That is because Bruce Allen Hughes, the legendary "Crown Royal Bandit," is finally behind bars and has been indicted in the United States District Court for the Northern District of Georgia.
     Hughes, who apparently had a fondness for Canadian whiskey, robbed about 30 banks in Georgia and Tennessee over a decade, taking over $300,000. Hughes' trademark during his crime spree was his use of a purple Crown Royal bag which he ordered bank tellers to place loot in. Hughes, a resident of Madison County, Georgia, apparently reeked of alcohol during his last robbery, of an Athens, Georgia, bank, and complained to customers that banks had foreclosed on his home, tips which were used by FBI agents who arrested Hughes at his home. Hughes is charged in the indictment with conspiracy to commit Hobbs Act robbery, armed bank robbery and use and possession of a firearm during the commission of a felony. He will be arraigned sometime after April 24.

Man Cons His Way Into Smuggling Organization, Sentenced to 17 Years

Kevin Felts lived a mundane life as a 60 year-old chemical engineer in Brazoria, Texas. That is, until he managed to convice Nora Aguilar, a former convict with ties to drug smuggling organizations, that he was a fighter pilot returned from Iraq. Aguilar, impressed, bought Felts a small plane and Felts began flying millions of dollars worth of cash for a drug cartel from various points in the United States to the Mexican border. Felts’ exciting new career as a drug smuggler ended, however, in March 2005, at Lee Gilmer Memorial Airport in Gainesville, Georgia, where Felts was apprehended carrying suitcases containing $1.3 million. He was sentenced last Thursday to 17 years imprisonment by Judge William C. O’Kelley of the United States District Court for the Northern District of Georgia.

Reflections on the Dickie Scruggs Saga

I have yet to weigh in on the many fine blogs that have followed the Dickie Scruggs case since the indictment in November of last year (particular kudos are due to David Rossmiller’s exceptional work here), but with Zach Scruggs’ plea to misprision of a felony last week, and, since Mississippi is the land of Faulkner, here is my editorial stream of consciousness:

My first thought on Zach Scruggs’ plea:

This is the way the world ends,
This is the way the world ends,
This is the way the world ends,
Not with a bang, but a whimper.

T.S. Eliot, The Hollow Men

It has been said by one prosecutor that misprision is for girlfriends, but, apparently, that prosecutorial gift extends to sons as well. It is surprising in the extreme that the government allowed Zach to enter a plea to misprision. The sentencing guidelines for misprision are very low, and that plea virtually guarantees that Zach won’t serve much time in prison.

One of the things that has struck me about the defendants’ plea colloquy is that several of them have wanted to weigh in and lessen their culpability (see here, Zach's plea transcript, p.15-16, and here, Dickie's plea transcript and his famous earwig comment, p. 15). Generally, statements by defendants in mitigation are not made until sentencing, and even then that can be a dangerous tact because here the defendants are entering pleas to some of the most serious offenses, bribing a judicial official, and straining at gnats at the plea is not cottoned to by district court judges.

I  was fundamentally surprised at three things in the pretrial motions practice in this case: (1) that more attacks were not raised by defense counsel against the wiretaps (there is an entire body of Title III litigation out there); (2) the shrill, overblown writing style of the defendants’ motions that, (3) was very effectively countered in direct, succinct writing that highlighted the nits at which the defendants were picking and the substantial, and fundamentally wrong conduct the defendants were engaged in.

Finally, I was extremely surprised at Dickie Scruggs’ guilty plea, particularly because the plea agreement, p.10, does not protect him from additional criminal investigations that, plainly, are ongoing.

In that respect, Balducci predicted in one of his conversations with Judge Lackey that he knows where the bodies are buried (Scruggs Indictment, p. 5). My guess, there are other bodies out there, and it will be interesting to see how aggressively the government pursues those case.

Transportation Safety Administration Employees Charged

Two Transportation Safety Administration (TSA) employees and a Delta Airlines employee were charged last week in the Northern District of Georgia with conspiring to distribute narcotics and attempting to distribute cocaine and heroin by smuggling the narcotics through Hartsfield-Jackson International Airport (HJIA). In a scheme sure to amuse anyone forced to submit to a random search of their person or baggage by TSA employees, Jon Patton, a TSA employee, allegedly entered into agreements with drug dealers to transport drugs from Atlanta to New York for a transportation fee. Patton allegedly met with drug dealers at HJIA where he would receive a carry-on bag containing narcotics. Patton would then allegedly take the bags through security himself, where they were not challenged by TSA screeners. Patton then allegedly would give the bags to Leslie Adgar, a Delta employee, who would transport the bags to LaGuardia Airport in New York, where she would deliver them. Unfortunately for Patton and Adgar—a “drug dealer” who arranged three trips was a Drug Enforcement Administration (DEA) confidential source. The alleged activities were discovered based upon a lead from the Kings County (New York) District Attorney’s Office.