February 2, 2010
RICO Case Decided by Supremes
Hemi Group v. City of New York, was decided by the Supreme Court with Chief Justice Roberts authoring the opinion (Scalia, Thomas, and Alito joined and Ginsburg joined in part). A dissent was written by Justice Breyer (Stevens and Kennedy joined). Justice Sotomayor did not participate in this case. The case provides guidance on what is required to meet civil RICO's causal element. The Court states:
"The City of New York taxes the possession of cigarettes. Hemi Group, based in New Mexico, sells cigarettes online to residents of the City. Neither state nor city law requires Hemi to charge, collect, or remit the tax, and the purchasers seldom pay it on their own. Federal law, however, requires out-of-state vendors such as Hemi to submit customer information to the States into which they ship the cigarettes.
Against that backdrop, the City filed this lawsuit under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that Hemi failed to file the required customer information with the State. That failure, the City argues, constitutes mail and wire fraud, which caused it to lose tens of millions of dollars in unrecovered cigarette taxes. Because the City cannot show that it lost the tax revenue "by reason of" the alleged RICO violation, 18 U. S. C. §1964(c), we hold that the City cannot state a claim under RICO. We therefore reverse the Court of Appeals’ decision to the contrary." (emphasis added)
The Court also stated that "[p]ut simply, Hemi’s obligation was to file the Jenkins Act reports with the State, not the City, and the City’s harm was directly caused by the customers, not Hemi. We have never before stretched the causal chain of a RICO violation so far, and we decline to do so today."
Justice Ginsburg additionally notes, "I resist reading RICO to allow the City to end-run its lack of authority to collect tobacco taxes from Hemi Group or to reshape the "quite limited remedies" Congress has provided for violations of the Jenkins Act."
The dissent finds the "failure to provide the" state "with the names and addresses of its New York City cigarette customers proximately caused New York City to lose tobacco tax revenue."
In the News & Around the BlogosphereR. Robin McDonald, Fulton County Daily Report, Attorney Says Prosecutors Engaged in Vendetta to Ruin Him -Ga. lawyer acquitted of money-laundering and drug conspiracy charges says troubles started with his zealous defense of drug trafficker
February 1, 2010
Ninth Circuit Affirms Ponzi Scheme Conviction and Sentence
The Ninth Circuit Court of Appeals issued a decision in United States v. Treadwell, that affirmed convictions in a case involving a Ponzi scheme. The government said that Treadwell was the "mastermind" of this Ponzi scheme and the appellate court found that more than 1,700 investors lost their investment from this Ponzi scheme. Following a jury verdict, the defendants were sentenced with Treadwell getting 300 months imprisonment; Sluder received 188 months and Saturday 63 months. There were also other terms for each of these sentences. Defendants appealed their convictions and also contested their sentences. The defendants claimed that "intent to defraud" under the wire fraud statute requires an "intent to cause an actual loss." They also argued that there was a Sixth Amendment violation in that "their sentences cannot be upheld as 'substantively reasonable' under 18 USC 3553(a) without reliance on judge-found facts - such as the amount of loss caused by the fraud - in violation of their Sixth Amendment jury trial right." Defendant Treadwell also argued that it "was error for the district court to impose a two-point upward adjustment for misrepresentations that he was acting on behalf of a charitable organization;" and that "his sentence is substantively unreasonable under 18 USC 3553(a). The Ninth Circuit rejected the arguments of defendant and affirmed the conviction and sentence.
(esp)(w/ a hat tip to Linda Ramirez)
January 31, 2010
Vrdolyak Sentencing Decision - Reversed & Remanded
Judge Posner (7th Circuit) offers a stinging opinion for Former Chicago Alderman Eddie Vrdolyak. (see decision here) Vrdolyak plead guilty to conspiracy to commit mail and wire fraud and received a sentence of five years probation.(see here) The government appealed this decision, and in a 2-1 opinion, Judge Poser of the Seventh Circuit wrote that:
"The gratuity of the crime suggests that there can be no assurance that if let off with a slap on the wrist, the defendant will not commit a future crime. He has lost his law license, but the crime of which he has been convicted did not require a law license. He did not benefit from the crime - but only because he was caught."
Hon. Posner notes that the trial court's "errors in calculating the guidelines range are indicative of an idée fixe that the defendant was not to receive a custodial sentence, even (as the government urged in the alternative) home confinement." And the court ordered resentencing with a different judge pursuant to a seventh circuit rule which provides:
"Whenever a case tried in a district court is remanded by this court for a new trial, it shall be reassigned by the district court for trial before a judge other than the judge who heard the prior trial unless the remand order directs or all parties request that the same judge retry the case. In appeals which are not subject to this rule by its terms, this court may nevertheless direct in its opinion or order that this rule shall apply on remand." (Circuit Rule 36)
Interestingly, the court decision is not a united one - as the Hon. Hamilton dissents. He agrees that there may have been a calculation error, but finds the error harmless. He notes the "number of factors that the district court could and did consider in mitigation. He states:
"The defendant is 71 years old, had no prior criminal record, and posed little risk of repeat offenses. He had given up his law license. The crime of fraud did not involve violence, and there was no element of public corruption. The defendant had agreed to help a friend by committing the crime, but he was not the instigator of the crime and did not actually benefit from it. The district court was also impressed by a surprising volume of information showing the defendant’s character was very different from his public image in the media. That information showed generosity with time, money, and influence to help people in need, especially where the defendant had no moral or other obligation to help them and where he received no publicity or recognition for his kindnesses. That is not the entire picture, of course, but those are all factors that could reasonably lead the district court to exercise its discretion under section 3553(a) to impose the sentence that it did."
This may be a case that produces an en banc court decision, but that remains to be seen.
See also Doug Berman, Sentencing Law & Policy Blog here and here; Chicago Breaking News, Vrdolyak's probation sentence reversed; prison possible
In the News & Around the Blogosphere
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Amir Efrati, WSJ Blog,Possible Madoff Effect: Triple-Digit White-Collar Prison Sentences
Jordana Mishory, Daily Business Review, law.com, Judge Dismisses 2 Counts Against Rothstein Firm's Former Accountants
Washington Post (AP), Federal prosecutors consider charges in probe of Hilton Hotels
In the News & Around the Blogosphere
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John Pacenti, Daily Business Review, Law.com, Rothstein Pleads Guilty to All Counts in $1.2 Billion Ponzi Scheme; Paul Brinkmann & Susan R. Miller, South Florida Business Jrl, Rothstein pleads guilty (hat tip to Brandi Palmer)
Jay Weaver & Amy Sherman, Miami Herald, Ponzi scheme kept up to end
Benda Sapino Jeffreys, Texas Lawyer, law.com, Judge Puts 2 Insurers on the Hook for Defense Costs for Stanford, 3 Executives
PR Newswire,Former Willbros International Executives Sentenced to Prison for Their Roles in $6 Million Foreign Bribery Scheme; DOJ Press Release, Former Willbros International Executives Sentenced to Prison for Their Roles in $6 Million Foreign Bribery Scheme
Gary Fields, WSJ, Plan Would Soften White-Collar Fines
David S. Hilzenrath, Wash Post, Swiss halt deal with U.S. that IDs Americans with secret UBS bank accounts; Ashby Jones, WSJ, In UBS Case, a Swiss Diss?
Del Quentin Wilber, Wash Post, U.S. appeals ruling in Blackwater case; Mike Scarcella, BLT Blog, DOJ, Defense Lawyers Want Court Papers Sealed in Blackwater Case
Peter Hadekel, The Gazette, Frustrations mount despite progress Quebec has made battling white-collar crime
Eleanor Hall, The World Today, Govt to raise fines, jail time for corporate crooks (Pertaining to Australia)
DOJ Press Release, Texas Company Pleads Guilty and Is Sentenced for Environmental Crime - First Conviction Under the Plant Protection Act
Lucian Kim, Business Week, Russia Must Soften Law on White-Collar Crime, Prosecutor Says
Charleston Gazette, Tax time means higher potential for online fraud
Amanda Bronstad, NLJ, law.com, Former Attorney, Business Partners Charged in Loan Modification Scam
Brian Baxter, American Lawyer, law.com, Former McGuireWoods Partner Charged in Corruption Probe
Amanda Bronstad, NLJ, law.com, Government Decries 'Fishing Expedition' for Misconduct in KB Home Prosecution
DOJ Press Release, Former Army Staff Sergeant Pleads Guilty to Money Laundering