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

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.

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According to a press release by the U.S. Attorney's Office for the Northern District of Georgia, Edward William Farley, of Hoschton, Georgia, was sentenced to 25 years imprisonment today in the U.S. District Court for the Northern District of Georgia for causing more than $23 million in losses to mortgage lenders in a real estate investment Ponzi scheme. Walter Julius Herman, of Dunwoody Georgia, was sentenced to over 2 years imprisonment. Farley was also ordered to pay restitution of $24,131,857. He had pled guilty to the charges last November.

Farley, a mortgage broker, operated through the entities Creative Home Search, Southern Land Partners, Georgia Land Group, and Global Mortgage. Farley engaged in same-day flips of properties in Buford, College Park, Conyers, Cumming, Dacula, Grayson, Lawrenceville, Lithonia, Norcross, Marietta, Roswell, Snellville and Suwanee. He paid Hermann, an appraiser, to fraudulently inflate the value of each property by $50,000 to $100,000. He also recruited purchasers to purchase the properties from one of his entities. In the process of flipping the properties, Farley would submit loan applications with false statements.

Farley was also charged with operating a real estate investment/Ponzi scheme through an entity called Alliance Resource Management. Farley falsely represented to investors that  Alliance Resource Management was in the business of purchasing residential properties, renovating the properties and selling them at a profit, when in truth Alliance Resource Management had insufficient equity or income to purchase or renovate property. Farley also falsely promised investors that their investments were guaranteed by a first security position in property, a personal guarantee or title insurance, and provided investors with false promissory notes promising interest rates between 14 and 60 percent. In typical Ponzi scheme fashion, Farley paid early investors with investment proceeds from later investors.

Finally, Farley was charged with fraudulently obtaining $1.2 million from Washington Mutual Bank
in a check kiting scheme by transferring funds he did not have among several Alliance Resource Management bank accounts, and withdrawing scheme proceeds before the “insufficient funds” checks were returned.

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Yesterday, a federal judge dismissed alleged drug charges against Henry Nicholas, the former Chief Executive of Broadcom Corp., a manufacturer of integrated circuits for broadband communications. In a related civil action, the judge, U.S. District Judge Cormac Carney of the U.S. District Court for the Central District of California, also ordered the Securities and Exchange Commission to amend alleged fraud charges against Mr. Nicholas and other former Broadcom executives within seven days, stating that he found "serious problems of proof" with the SEC's complaint against the former executives and inquired as to what proof the SEC had against them, as reported by The National Law Journal. The court had previously dismissed the SEC's complaint without prejudice.

Last month, during the trial of Mr. Nicholas and former Broadcom Chief Financial Officer William Ruehle, the court had granted Nicholas' and other defendants' motions to dismiss charges of backdating stock options based on prosecutorial misconduct and entered judgments of acquittal. Judge Carney found that the government "distorted the truth-finding process" and infringed on the defendants' due process rights to a fair trial. The court also questioned the evidence supporting the charges, noting that there was "considerable debate" regarding certain accounting practices used by Broadcom and many other major companies, including Microsoft and Apple.

The defendants made their prosecutorial misconduct claims after the court granted immunity to former Broadcom executives David Dull and Henry Samueli at the request of counsel for Mr. Ruehle so that the witnesses would not refused to answer based upon their Fifth Amendment privilege against self incrimination. Mr. Ruehle wanted Mr. Dull and Mr. Samueli to testify in order to rebut the testimony of Nancy Tullos, former Broadcom Chief of Human Resources, a witness for the government who had pled guilty in 2007 to obstruction of justice charges. The court found that the prosecution had improperly influenced Dull's, Samueli's and Tullos' testimony. Judge Carney also reprimanded the government for leaking misleading information regarding the grand jury proceedings to the news media. It set a hearing for the government to show cause as to why the narcotics case against Mr. Nicholas should continue.

At trial, he court also set aside Mr. Samueli's plea of guilty to making alleged false statements to the SEC following his testimony in Mr. Ruehle's and Mr. Nicholas' trial, stating that he had difficulty finding how Mr. Samueli had committed any crime. Judge Carney found that the government had pressured Broadcom into terminating Mr. Samueli, calling the government's treatment of him "shameful."

The court furthermore criticized the government for leaving Mr. Dull "hanging in the wind" for two years, treating him as an alleged co-conspirator but not charging him. The prosecution had entered a nonprosecution agreement with Mr. Dull after threatening to charge him with perjury based upon statements which Mr. Dull intended to make in his testimony in the Ruehle/Nicholas trial.

The extensive allegations of prosecutorial misconduct in the case against Mr. Nicholas and the other defendants included an allegation by the defense that the government had used Mr. Nicholas' 13 year-old son to gather evidence against his father.

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As reported by Law.com, Bruce Karatz, Chief Executive Officers of KB Home, a home construction corporation based in Los Angeles, California, was indicted in the action of U.S. v. Nicholas, 2:09-cr-00203-ODW (C.D.Ca. 2009), on 20 counts of fraud for defrauding the company and its shareholders of millions of dollars in undisclosed backdated stock option over a period of seven years, and concealing the fraud from KB Home's  directors, compensation committee and shareholders. Karatz's trial in the U.S. District Court for the Central District of California is scheduled to begin on February 23.

Karatz's attorneys have requested a hearing regarding whether prosecutorial misconduct has tainted the government's case against Karatz. Karatz contends that two witnesses for the government--James Johnson, former Chairman of the Board of Directors' Compensation Committee for KB Home, and Gary Ray, former Vice President of Human Resources--initially believed that the stock options grant practice was lawful, but changed their position following contacts with the prosecution. Karatz's lawyers want to examine Johnson regarding why he denied allegedly defending KB Home's option granting process during an internal investigation by the company's outside counsel in his statements to prosecutors. 

The defense also wants to question Ray, who has pled guilty to obstruction of justice and is cooperating with the government, regarding why he had allegedly previously maintained that the process was "lawful and proper." Following is a link to

.

Karatz's motion is based on an order in December by U.S. District Judge Cormac Carney in the action of U.S. v. Nicholas, SACR 08-00139 CJC (C.D.Ca. 2008), another backdating case, in which the Court dismissed the government's indictment against co-founder of Broadcom Corp., Henry Nicholas, and former Broadcom Chief Financial Officer William Ruehle, blasting the prosecution for "distorting the truth-finding process" by intimidating and improperly influencing key witnesses. Karatz also relies on the Ninth Circuit Court of Appeals' overturning last August of the conviction of former Chief Executive Officer for Brocade Communication Systems, Inc., Gregory Reyes, for backdating based on false statements by the prosecution in closing arguments that Brocade's finance department didn't know about backdating. A hearing on Karatz's motion has been scheduled for February 8.

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As reported by Law.com, New York-based Comverse Technology, Inc., the worlds largest manufacturer of voice mail software, has entered into a $225 million settlement in a class action brought against it stemming from a backdating scandal. William Sorin, Comverse's former general counsel, and Comverse's former CEO, Jacob "Kobi" Alexander, were charged by the SEC and Federal prosecutors in 2006 with fraudulenty changing the grant dates of stock option awards from 1998 to 2000. In all, Sorin realized $14 million in profits from stock options, approximately $1 million of which was due to backdating. Sorin pled guilty in the U.S. District Court for the Eastern District of New York to conspiracy to commit securities fraud, mail fraud and wire fraud in 2006, and has already served his sentence of a year and a day in prison. Alexander an Israeli citizen, fled to Namibia to avoid prosecution.

Plaintiffs brought a derivative actions against Comverse in New York Federal and State courts based on the backdating. Alexander has agreed to pay $60 million and Sorin has agreed to pay $1 million to fund the settlement. In exchange, Comverse will drop its lawsuit against the former executives, who will also drop their counterclaims against the company.  The company earlier settled claims relating to the improper backdating and other accounting problems with federal regulators.

Sorin had previously entered into a settlement with the SEC, agreeing to pay $3 million in fines. However, his attorneys have asked the Court to vacate the SEC settlement and judgment, claiming that Federal prosecutors violated promises they made as part of his plea deal. Sorin claims that prosectors agreed not to object to his request to avoid jail time when he agreed to plead guilty to criminal charges and pay the SEC $3 million to settle civil charges, however he alleges that the government reneged on its promise and opposed his request at sentencing.

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We did not weigh in yesterday, but the biggest federal criminal defense news was clearly the conviction of U.S. Representative William Jefferson of Louisiana in his criminal trial in the U.S. District Court for the Eastern District of Virginia, as reported by the New Orleans Times-Picayune. The jury of eight women and four men returned a verdict of guilty against Jefferson on 11 of 16 counts, including 2 counts of conspiracy to solicit bribes to a public official in violation of the Foreign Corrupt Practices Act (FCPA), 2 counts of soliciting bribes, 3 counts of honest services fraud, 3 counts of money laundering, and one count of racketeer influenced and corrupt organization (RICO) violations. As a testament to Jefferson's defense, the jury did not find Jefferson guilty on three of the honest services charges as well as a charge for obstruction of justice and a count for violation of the FCPA.

Jefferson, who is 62, faced a maximum of 235 years in prison if convicted on all counts. He has been allowed to remain released pending his sentencing on October 30. A forfeiture hearing will be held regarding his assets.

Jefferson was the first African-American congressman from Louisiana since Reconstruction.

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As reported by the New Orleans Times-Picayune, Judge T.S. Ellis, III, of the U.S. District Court for the Eastern District of Virginia read instructions to the jury yesterday which lasted over 2 & 1/2 hours, and the jury retired for its deliberations in the case against former U.S. Representative William Jefferson. The jury deliberated for about four hours and will re-convene to continue deliberations this morning.

The jury weighing the evidence in the six week long trial of Jefferson on 16 criminal counts, including racketeering, honest services fraud and violations of the Foreign Corrupt Practices Act, consists of two white males, six white females, two black males and two black females. Jefferson's case is the first time the Foreign Corrupt Practices Act has been applied to a public official. The Court sent three alternate jurors home yesterday, instructing them to remain "pristine" with regard to their exposure to information regarding the case.Jefferson's lead attorney, Robert Trout, told reporters that Jefferson intends to be present at Court each morning when the jury arrives.

Closing arguments were heard earlier in the week, with numerous media outlets and journalists from Louisiana in attendance.

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The trial of former Representative William Jefferson, which has gone on for six weeks in the U.S. District Court for the Eastern District of Virginia, will come to an end today. As reported by Ashby Jones at the Wall Street Journal Law Blog and UPI, both sides gave their closing arguments yesterday. Judge T.S. Ellis will give jury instructions and likely send the case to the jury this morning.

The case is best known for the infamous discovery of $90,000 in cash stuffed in boxes for burgers and pie crusts in the freezer at Jefferson's home by federal agents. Jefferson was indicted in 2007 on 16 counts of bribery, racketeering, and violations of the Foreign Corrupt Practices Act. The government charged Jefferson with using his position to promote business ventures in West Africa in exchange for cash payments for his family.

Assistant U.S. Attorney Rebecca Bellows argued during the govenrment's closing that Jefferson allegedly schemed to give at least $100,000 in cash (the "freezer money") to the Vice President of Nigeria, Atiku Abubakar, as a bribe in exchange for granting rights to a telecommunications company with ties to Jefferson's family. The government also played video and audio tapes of meetings between Jefferson and Virginia businesswoman Lori Mody, who was working for the government as an informant. In one video, Jefferson supposedly informed Mody that the cash would be "doled out" to "make sure the hook is in there," and on another tape Jefferson allegedly referred to the bribe as "a goodwill present."

The defense maintained during trial that Jefferson's conduct was stupid or unethical, but not criminal. Defense attorney Robert Trout told the jury during his closing arguments that the government wanted to make Jefferson's actions a crime when it was really a "gray area." He told the jury that Jefferson only agreed to give the money to Abubaker in order to please Ms. Mody.

Prior to closing arguments, Judge Ellis refused to dismiss an obstruction of justice count against Jefferson. Jefferson faces a lengthy prison sentence if convicted.

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