Posted on May 22, 2008 by Anthony Lake

CEO Convicted in $150 Million Hedge Fund Scheme

     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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Posted on May 16, 2008 by Anthony Lake

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.

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Posted on April 1, 2008 by Anthony Lake

United States v. Svete: Fraud Requires Scheme Calculated to Deceive "Reasonable Person"

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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