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

Randy Jones, a former executive vice president with Community Bank & Trust who worked for the bank for 30 years, pled guilty last week in the U.S. District Court for the Northern District of Georgia for an alleged multi-million dollar fraud scheme, according to an article in the Atlanta Journal-Constitution. Specifically, Jones was alleged to have made loans to a customer, Joseph Penick, Jr., to purchase tracts of land in North Georgia. Penick is alleged to have paid Jones $770,000. Penick has pled guilty to his involvement in the scheme.

Jones was also alleged to have used family members and friends to obtain more than $800,000 in loans from Community Bank & Trust to purchase an interest in six Zaxby's restaurants.

Community Bank & Trust was shut down by regulators in January of 2010. The bank opened in 1900 and had been insured by the Federal Deposit Insurance Corporation since 1934. Before it failed, it had 36 branches across the region and $1.1 billion in assets. An FDIC report in September of 2010 found that Community Bank & Trust failed to follow its own loan policy and had made more than $10 million in bad loans. Georgia has had more failed banks than any other state--52 since 2008. 

Investigators say he used the names of family members without their consent to obtain more than $800,000 in loans from the bank, which he used to buy a stake in six Zaxby's restaurants. And they claim he approved more than $2.8 million in loans to fraudulent borrowers so that a customer who was a real estate developer could pay down interest on loans.

The bank failures have also led to a number of prosecutions and suits against former bank executives, employees and others. Five people with ties to Omni National Bank of Atlanta were convicted on bank fraud and other charges after the bank collapsed during a federal mortgage fraud probe. A lawsuit by the FDIC also alleges that former officers of Alpharetta-based Integrity Bank engaged in gross negligence and breach of fiduciary duty relating to making bad loans. One of the defendants is State Senator Jack Murphy, a former bank official and the new Chairman of the Senate Banking Committee. Sen. Murphy has denied any wrongdoing.

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According to a news release by the U.S. Attorney's Office for the Southern District of Georgia, Attorney General Eric Holder announced last week the results of Operation Broken Trust, an unprecedented nationwide law enforcement operation targeting a variety of investment schemes. President Obama established an inter-agency Financial Fraud Enforcement Task Force, consisting of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement, which was launched on August 16, 2010. The purpose of the Task Force is to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. To date, Operation Broken Trust has taken action against 343 criminal defendants and 189 civil defendants for schemes involving more than 120,000 victims and an estimated more than $10 billion in losses.

The news release states that, in the Southern District of Georgia, the operation has resulted in the sentencing of Alvin Charles Ramsey, a former financial advisor, for defrauding his clients out of over $500,000 and Augusta, Georgia, investment advisor Walter Marian Williams for defrauding his clients of over $1.7 million.

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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.” 

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United States Sentencing Guideline § 3B1.3 provides for a 2 level increase in a defendant's offense level "[i]f the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense." U.S.S.G. § 3B1.3. The comments to § 3B1.3 further define "public or private" trust as:

[A] position of public or private trust characterized by professional or managerial discretion (i.e., substantial discretionary judgment that is ordinarily given considerable deference). Persons holding such positions ordinarily are subject to significantly less supervision than employees whose responsibilities are primarily non-discretionary in nature.

U.S.S.G. § 3B1.3 cmt. n. 1.

The defendant in United States v. Louis, No. 08-10916, 2009 WL 485239 (11th Cir., Feb. 27, 2009), Jacquelin Louis, was a federally-licensed firearms dealer in Orlando, Florida. The Bureau of Alcohol, Tobacco and Firearms decided to test Louis' compliance with federal regulations restricting the sale of firearms to purchasers who are not convicted felons by arranging for a paid informants to contact Lewis, representing that they were convicted felons, and arrange to purchase firearms through straw purchasers. Id. at *1. The ATF conducted several controlled purchases, and Louis was arrested and indicted for two counts of selling a firearm to a convicted felon. Id. at *2. Louis was convicted and, at sentencing, the district court increased his offense level by two for abuse of position of trust pursuant to § 3B1.3, finding that firearms dealers occupied a position of public trust on the alleged ground that the public "trusted" him to prevent criminals from obtaining dangerous weapons. Id. at *2, *7. Louis appealed the enhancement. Id.

On review, the Eleventh Circuit recognized that "'[t]he determination of whether a defendant occupied a position of trust is extremely fact sensitive.'” Id. at *3 (citing United States v. Britt, 388 F.3d 1369, 1372 (11th Cir. 2004). It also recognized the importance of discretion on the part of the defendant. Id. at *4. The Court concluded, pursuant to the Guideline, that:

Fiduciaries and employees of a public or private agency who exercise considerable discretion are subject to the enhancement. Lower-level, closely supervised employees who exercise little discretion are not. The enhancement also requires that the offender occupy a position of trust in relation to the victim, not another party.

Id.

The Court proceeded to rely on the Seventh Circuit's decision in United States v. Podhorn, 549 F.3d 552, 560-61 (7th Cir.2008) to conclude that the mere fact that a firearms dealer is licensed by the federal government does not mean that the dealer occupies a position of public trust under § 3B1.3. Id. at *5, *6. The Court noted that the federal government "does not review or warrant the “professional judgment” of a prospective licensee; to receive a license, an applicant must merely submit an application to the Bureau, supply fingerprints and a photograph, pay a fee, and pass a background check." Id. at *6 (citing § 923(d)(1)). It also noted that the ATF had no discretion to deny an application if the licensee met the statutory requirements, and that firearms dealers exercised no discretion in regard to their compliance with federal law. Id. The Court then reversed Louis' conviction and remanded for resentencing, holding that the district court applied an erroneous legal standard in enhancing his sentence for abuse of position of trust. Id. at *7.

Louis also contains a comprehensive summary of the types of positions for which the Court has upheld or reversed applications of enhancements for abuse of a position of trust. Id. at *4 (citing cases).

Gillen Withers & Lake LLC are white collar and corporate criminal defense attorneys with an outstanding reputation and track record, handling cases throughout Georgia and the nation. Call our Atlanta, Georgia, office at (404) 842-9700 or our Savannah, Georgia, office at (912) 447-8400.

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