Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

Former lobbyist Jack Abramoff was sentenced to 4 years imprisonment yesterday, as reported by the Associated Press. The Abramoff scandal shook Washington and contributed to the Republicans' loss of Congress in the 2006 mid-term elections. Following his arrest, Abramoff cooperated with the FBI in investigating his own corruption and that of others. Abramoff assisted the Justice Department in obtaining corruption convictions against former Republican Representative Bob Ney, former Deputy Interior Secretary J. Steven Griles and several aides.

Abramoff told the court that he was a "broken man," and was not the same person "who happily and arrogantly engaged in a lifestyle of political and business corruption." Abramoff's cooperation with the government spared him what could have been a maximum sentence of 11 years. He also faces criminal proceedings in Florida for a fraudulent casino deal.

 

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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.

 

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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.

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According to the Atlanta Journal and Constitution, Perimeter Mortgage Funding, which operated from 2001 to 2005 before collapsing, cost lenders $7 million. One of its principals, Kevin Wiggins has pled guilty to one count of conspiracy and two counts of wire fraud in the United States District Court for the Northern District of Georgia, and who faces up to 15 years in prison and a $750,000 fine and who will be ordered to repay the defrauded lenders. Wiggins' sister, Lydia Wiggins Christopher, and appraiser Frank Astwood have also pled guilty. The defendants will be sentenced on Tuesday.

Perimeter Mortgage Funding originated mortgage loans and sold them to larger lenders, including to Fannie Mae, Freddie Mac, Colonial Bank, JP Morgan Chase, Wachovia and Washington Mutual. It collapsed when it ran out of funds to reimburse purchasers of the fraudulent loans.

The prosecution claims that Wiggins would agree to purchase properties and then deed them to straw borrowers, who were really Wiggins' relatives and friends. The borrowers would then secure loans on the properties, either purchase loans or cash out refinancings, using falsified information, including inflated appraisals and false statements about renovations and rental income. Lenders were deceived by photographs showing false renovations and concealing damage to the properties. Wiggins used the proceeds of the loans to purchase the properties and to pay himself and his accomplices, including by having closing attorneys disburse checks to corporations controlled by him.

In all, Wiggins and his accomplices obtained inflated loans on 88 distressed properties, many in Atlanta's West End neighborhood. In one case, a loan for $128,000 was obtained for a home which was purchased for $24,000. Wiggins would not pay the mortgages, and the properties would go into foreclosure. Mortgage fraud by individuals such as Wiggins has made approximately 20 percent of the homes in West End vacant. Wiggins has claimed that he had good intentions for the properties, including a desire to rehabilitate the West End and rent the properties to students before selling them. West End residents Brent Brewer and Paulette Richards, have submitted a video to the court about their community's struggle with mortgage fraud entitled "When a House is Not a Home," and are asking for the maximum sentence for Wiggins.

A recent Fannie Mae report lists Atlanta as the second worst for mortgage fraud, only behind Minneapolis. In June, the United States Department of Justice began "Operation Malicious Mortgage," a nationwide crackdown on mortgage fraud. Last year, Phillip Hill and nine other defendants were convicted in Georgia's largest-ever mortgage fraud case.

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     The decline in the housing market has been accompanied by a huge increase in the area of “foreclosure rescue” fraud, as reported by the Atlanta Business Chronicle. Given the slowdown in the mortgage market and the rise in foreclosures, unscrupulous types have found new areas for fraud. Although foreclosure rescue fraud may take many forms, in its simplest manifestation, companies or consultants seek out homeowners facing foreclosure and offer to help them save their homes for a fee. According to Bill Brennan, Director of the Atlanta Legal Aid Society’s Home Defense Project, homeowners send $800 or $900 to the out-of-state companies which take the money and do nothing. Another form of the scheme involves consultants who convince homeowners voluntarily surrender the titles to their homes to them, and then walk away with all the equity in the home. The companies and consultants review court foreclosure lists and then target their victims through telemarketing and other means.

     States are responding to the rise of foreclosure rescue fraud by passing laws prohibiting foreclosure rescue fraud and giving victims recourse. California and Florida, which have the highest numbers of foreclosures in the nation, have already enacted laws. 19 other states, including Georgia, have introduced bills this year regarding the practice. Georgia’s bill, sponsored by State Senator Gail Davenport of Jonesboro, contains a series of restrictions on foreclosure rescue fraud, including requiring any rescuer obtaining a home through foreclosure to pay the owner at least 82% of the fair market value of the home, and allowing homeowners to obtain treble damages.

     Foreclosures in the metropolitan Atlanta area are up 23% from spring of 2007. Fulton, DeKalb and Gwinnett lead the area in the number of monthly foreclosures.

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    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.

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The Eleventh Circuit Court of Appeals has held that the United States must be the ultimate target of a conspiracy to defraud under 18 U.S.C. § 371. Jildardo Mendez wanted a Florida commercial drivers license (CDL), but spoke very poor English. Mendez contacted Steven Baez, a member of the Florida Army National Guard, who was illegally selling DA-348E forms, which were Department of the Army Operator Qualification Records which would allow an individual to waive completion of Florida CDL testing. Mendez paid Baez $1,000 for the form and obtained a Class A CDL, but was arrested during a subsequent investigation of Baez, and charged and convicted of conspiracy to defraud the United States in violation of § 371, and unlawful production of a Florida CDL in violation of 18 U.S.C. § 1028.

Mendez appealed, arguing that the evidence was insufficient to support his conviction pursuant to § 371 because there was no evidence that he was aware of any connection between a Florida CDL and the federal government, and the Eleventh Circuit agreed with him and reversed in United States v. Mendez, No. 07-13443, 2008 WL 2117607, *5 (11th Cir. May 21, 2008) (per curiam). The Court observed that § 371, which provides that it is a crime to “conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner of for any purpose…,” contains two clauses. Id. at *2. Under the “any offense” clause, the government does not have to allege that the United States was the intended victim of the conspiracy, however under the “defraud” clause, “‘the government must prove that the United States was the ultimate target of the conspiracy,” whereas under § 371's “any offense…’” Id. at *2 (quoting United States v. Harmas, 974 F.2d 1262 (11th Cir.1992)). The Court then discussed the United States Supreme Court’s decision in Tanner v. United States, 483 U.S. 107 (1987), in which the Supreme Court reversed the defendants’ convictions for conspiracy to defraud under § 371 where the victim of the conspiracy, the federal Rural Electrification Administration, was a private corporation which merely received financial assistance from, and was supervised by, the United States. Id. The Eleventh Circuit held:

Mendez’s § 371 conviction is precisely what the Tanner Court meant to prevent. The facts to which the parties stipulated do not show that Mendez even knew the federal government was in involved in the issuance of Florida CDLs, let alone that the United States was the ultimate intended target of Mendez’s conduct. Accordingly, under Tanner, there was no basis for the district court to find that Mendez was guilty beyond a reasonable doubt of defrauding the United States under 18 U.S.C. § 371.

Id. at *3.

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     Kirk Wright founded and was Chief Executive Officer of Atlanta-based International Management Associates (IMA), which managed several hedge funds, as reported by the Atlanta Business Chronicle. By 2006, IMA had thousands of clients, had received more than $150 million in investments and also had offices in New York, Los Angeles and Las Vegas. However, IMA actually lost almost all the money invested, yet Wright falsely reported monthly gains to investors. At the same time, Wright diverted millions to his personal use, spending the money on a half million dollar wedding, multiple properties in Atlanta and California, luxury vehicles, jewelry and on relatives.

     When several investors requested distributions early in 2006, IMA collapsed and the investors, including several National Football League players, received bad checks and filed suit against IMA. Wright proceeded to take $500,000 in cash from the company and fled. The Federal Bureau of Investigation conducted a nationwide manhunt and arrested Wright in May of 2006 at the Ritz Carlton hotel in Miami Beach, Florida, finding him in possession of numerous pieces of false identification and equipment for making false identifications.

     Wright was charged with mail fraud, securities fraud and money laundering and was convicted following a two week trial in the United States District Court for the Northern District of Georgia. He faces up to 710 years in prison and $16 million in fines.

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   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.

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     While many late preparers are busy filling out forms, the United States District Attorney's Office for the Northern District of Georgia has issued a press release to help motivate taxpayers to be honest with the Internal Revenue Service. United States Attorney David Nahmias told the press last Thursday that "The IRS and other federal investigative agencies are also on the lookout for related fraud, and taxpayers need to know that you--not your tax preparer--are ultimately responsible for the information that goes on your tax return" (not a promising sign for the trusty old good faith reliance on professional tax advice defense, but anyway).
    Mr. Nahmias rounded out the release with a string of cautionary tales--or rather recent tax prosecutions by the USAONDGA against both filers and tax preparers. Among the cases are a tax preparer who neglected to file her own tax returns, despite an income of over $400,000, and another preparer which submitted over 100 returns claiming over $460,000 in false Telephone Excise Tax Credits.

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    Tony Pellicano was the "Private Eye to the Star." However, Pellicano's investigative techniques included threats, illegally tapping phones, and bribing police and telephone company officials to run illegal checks. Consequently, Pellicano and his associates are now in a California district court on numerous charges, including wire fraud, identity theft and illegal wiretapping. Hollywood elite who have already testified at the trial include Garry Shandling, Sylvester Stallone, Chris Rock, Paramount Pictures CEO Brad Grey and former Walt Disney Co executive Michael Ovitz.
     Pellicano's activities were finally discovered when he smashed the windshield on the car of investigative journalist Anita Busch and left a dead fish on the car with a rose in its mouth and a note saying "Stop" in 2002. Later, two men tried to kill Bush at her apartment. Police raided Pellicano's Hollywood office and uncovered evidence of his illegal tactics.
     Pellicano is acting as his own attorney at the trial. The prosecution was forced to drop 28 charges when it could not bring forward the witnesses to prove them, and has rested its case.

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The Eleventh Circuit Court of Appeals has issued a ruling which confirms one more element which the government must prove, and which the jury must be instructed on, in order to convict a defendant of fraud. In United States v. Brown, 79 F.3d 1550, 1557 (11th Cir. 1996), the Eleventh Circuit held (or re-confirmed) that, in order to prove the crime of mail fraud, in violation of 18 U.S.C. § 1341, “the government must show the defendant intended to create a scheme ‘reasonably calculated to deceive persons of ordinary prudence and comprehension.”’ (Quoting Pelletier v. Zweifel, 921 F.2d 1465, 1498-99 (11th Cir.1991)). Last week, in United States v. Svete, NO. 05-13809, 2008 WL 788407, *7 (11th Cir. March 26, 2008), the holding of Brown was finally applied to Eleventh Circuit Pattern Jury Instruction (Criminal Cases) 50.1, which, as the Court noted, “does not include the reasonable person standard as articulated in Brown…” id.

In Svete, the defendants were convicted of conspiracy, money laundering and mail fraud for allegedly defrauding investors in “viaticals,” in which persons (“viators”) sell the right to receive benefits under their life insurance policies to purchasers in exchange for tax-free cash. Id. at *1-2. The government alleged that the defendants defrauded purchasers of viaticals by misrepresenting the life expectancies of the viators, the status of the life insurance policies and the risks associated with purchasing certain viatical contracts. Id. at *2. The defendants appealed, arguing that the district court erred in failing to instruct the jury consistent with the language of Brown, and the Eleventh Circuit reversed, stating that:

The inaccuracy of the definition of “scheme to defraud” in the jury instruction seriously impaired defendants' ability to conduct their defense on the substantive counts of mail fraud. Defendants did not have the opportunity to argue in connection with charged law that the contracts, signed by the investors, made it unreasonable for any prudent investor to have relied upon contrary statements by sales agents or [the Defendants’] promotional literature. Defendants did not have the opportunity to argue in connection with charged law that investors should have sought independent advice on investing in viaticals. Such arguments are clearly contemplated by controlling law in this Circuit. Therefore, the district court abused its discretion when it did not include the Brown, [cit.]., language in the jury instruction. [Defendants] are entitled to a new trial on the substantive counts of mail fraud.

 Id. at *7 (citing Brown at 1557).

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