"Smiling Bob" Enhancement Company Set for Fraud Trial

Executives of a company known for the "Smiling Bob" ads that promote "natural male enhancement" are set to go on trial in an 111-count indictment that accuses them of defrauding consumers out of over $100 million.^[1]

Government lawyers have assert that they expect to call about 90 witnesses in a trial anticipated to take about a month in which company president Steven Warshak, his mother and four other employees of Berkeley Premium Nutraceuticals are accused of conspiracy to commit money laundering plus mail, wire and bank fraud.^[2]

Products made by Berkeley Nutraceuticals include vitamins, nutrients and Enzyte, a products whose television pitchman was a character called "Smiling Bob." The company claims Enzyte has 2 million users worldwide.^[3]

Federal criminal attorney Douglas McNabb has previously discussed mail fraud in his blog, which can be found here; he has also discussed the federal crime of wire fraud which can be found here; money laundering can be found here.

---

^[1] Associated Press Staff, Enzyte Fraud Trial Set to Start, Associated Press Newswire, January 8, 2008, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.

Encinias Charged with Bank Fraud and Identity Theft

Lori Lloyd Encinias was recently charged with 43 counts of bank fraud, aggravated identity theft, access device fraud and mail fraud; she accepted a plea deal Tuesday, December 18.^[1]

Encinias appeared in U.S. District Court to plead guilty to two counts of access device fraud and two counts of aggravated identity theft, after a federal grand jury indicted Encinias last September, accusing her of using stolen Social Security numbers to open at least three bank accounts and take out several credit cards.^[2]

According to a statement in advance of a guilty plea, Encinias admitted to taking out an Overstock.com Visa card over the Internet using a stolen Social Security number and made charges totaling $5,300 over a one-month period.^[3] She also admitted to using another stolen number to take out a CitiBank Visa card over the Internet to run up $4,900 in charges from December 2005 to August 2006.^[4]

Sentencing has been scheduled for March 3, 2008. She faces a maximum mandatory two years in federal prison for each identity theft count and up to 15 years for access device fraud.^[5]

Aggravated Identity Theft
Aggravated identity theft occurs when the crime of identity theft is coupled with another felony, here it is mail fraud. Under 18 U.S.C. § 1028A, if a person knowingly and unlawfully transfers, possesses, or uses a means of identification of another person in conjunction with the commission of a set list of felonies, that person will be punished as those felonies provide and that person will additionally be imprisoned for 2 years. If the felony happens to be a terrorism offense, that person will receive an additional 5 years of imprisonment.^[6]

Furthermore, that person will not be placed on probation, nor will the term of imprisonment run concurrently, unless the court has been given discretion to do by the Sentencing commission.^[7]Federal criminal attorney Douglas McNabb has also previously discussed identity theft in his blog, here; and the federal crime of mail fraud has been discussed, here.

---

^[1] Deseret Staff, Woman pleads guilty on fraud, theft counts, Deseret Morning News, Dec. 23, 2007, available at http://deseretnews.com/article/1,5143,695238473,00.html (last visited December 30, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] 18 U.S.C. § 1028A (2007).
^[7] Id.

Le-Nature's Inc. Officials To Be Investigated for Fraud

Federal prosecutors are seeking the forfeiture of more than $20 million in jewelry allegedly bought by former officials of bankrupt drinks maker Le-Nature's Inc.^[1] Le-Nature’s is also being investigated in an alleged money laundering and fraud scheme.^[2]Company officials are being investigated on possible counts of mail, wire and bank fraud, laundering of monetary instruments, and engaging in unlawful monetary transactions.^[3]

Le-Nature's was forced into bankruptcy in October last year amid allegations of accounting fraud.^[4] The company, which made bottled waters, teas, juices and nutritional drinks, is believed to have accumulated more than $820 million in debt.^[5]

Federal agents seized gems, diamond-encrusted watches, pearls and gold, silver and platinum jewelry worth more than $20 million from safes in a secret room at the company's Latrobe facility, the filing said. ^[6]

Authorities alleged in court documents that the company's annual revenues were substantially overstated and financial statements doctored for 2005 to show revenues of more than $287 million when it was actually about one-tenth of that amount.^[7] Prosecutors are also alleging that two sets of books were kept; one reflecting true business activity; the other fictitious but allegedly used to prepare financial statements.^[8]

Mail Fraud
Mail fraud is a crime under 18 U.S.C. § 1341. Under this section, it is illegal to devise a scheme to defraud and then use the mail to carry out the scheme. The punishment for committing mail fraud is a fine, imprisonment for up to 20 years, or both. If convicted, money laundering carries a maximum 20-year prison sentence and a $500,000 fine, and mail fraud carries a maximum 20-year sentence and a $250,000 fine.

Wire Fraud
Wire fraud is covered under 18 U.S.C. §1343 whereunder it states that whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.^[9]

Federal criminal attorney Douglas McNabb has also previously discussed mail fraud in his blog, which can be found here; he has also discussed the federal crime of wire fraud which can be found here.

---

^[1] Daniel Lovering, Feds seek forfeiture of $20M in jewelry seized from Le-Nature's, Associated Press Newswire, September 26, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] 18 U.S.C. §1343 (2007).

Judge Overturns Jury Verdict in Public Corruption Case

Former Mayor Ted LeBlanc was found guilty last April as a result of a probe that also netted convictions of former Norristown administrator Anthony Biondi and contractor Thomas Carbo.^[1]

LeBlanc was also found guilty of honest services fraud, bribery, bank fraud, and tax charges.^[2] LeBlanc, a republican, allegedly accepted a $10,000 bribe from borough insurance agent Herbert Bagley in exchange for LeBlanc insuring that Bagley (who is charged with paying a bribe to LeBlanc) continued to be appointed the borough’s insurance broker.^[3] Bagley was in danger of losing his contract because his business partner had been charged in state court with stealing hundreds of thousands of dollars of borough insurance payments in late 2002.^[4]

Carbo, who owned Tommy's Paving & Excavating and was involved in the contracting with the other men, was convicted of mail fraud and conspiracy in June 2006 and was facing 24 to 30 months in prison. ^[5] The jury deliberated for a little more than four hours following a six-day trial.^[6]

However now a federal judge has taken the rare action of overturning the jury’s verdict, saying no "rational" jury would have found a suburban contractor guilty in a public corruption case.^[7] According to testimony, Biondi paid Carbo for use of a truck that Biondi needed to do moonlighting jobs, and then awarded Carbo borough work without disclosing their financial relationship.^[8]

Federal criminal defense lawyer Dino Privitera had argued that Carbo should not be held criminally responsible for Biondi's lapse.

In a 75-page ruling issued Friday, Aug 10, U.S. District Judge Mary McLaughlin agreed.^[9] "The evidence presented is insufficient to allow a rational jury to find beyond a reasonable doubt that Mr. Carbo knew that Mr. Biondi was required to disclose their relationship to the state," she wrote.^[10]

Honest Services Fraud
When a person is convicted of some type of “honest services” fraud, it really means that 18 U.S.C. § 1346 is being used. Under section 1346, the term “scheme or artifice to defraud,” as found in the mail fraud statute, is understood to include a scheme or artifice to deprive another of the intangible right of honest services.

Mail Fraud
Under 18 U.S.C. § 1341, it is a crime for a person to devise a scheme or artifice to defraud, and then use the nation’s mail system to carry out that scheme. The punishment for a violation of section 1341 is a fine, imprisonment for up to 20 years or both. If a financial institution is harmed in the scheme, the fine can be as high as $1,000,000, and the prison sentence can be as long as 30 years.

Federal criminal defense attorney Douglas McNabb has previously discussed the federal crime of bank fraud in his blog, here.

---

^[1] AP Staff, U.S. judge overturns contractor's guilt in Norristown corruption, Associated Press Newswire, August 13, 2007, available at available at LEXIS, News Library, Wire News Services File.
^[2] Rich Manieri, U.S. Attorneys Office Press Release, Former Norristown, PA, Mayor Found Guilty, April 17, 2007, available at http://www.usdoj.gov/usao/pae/News/Pr/2006/apr/LeBlanc.html (last visited August 13, 2007).
^[3] Id
^[4] Id.
^[5] AP Staff, supra note 1.
^[6] Manieri, supra note 2.
^[7] AP Staff, supra note 1.
^[8] Id.
^[9] Id.
^[10] Id.

No Bail for Pearlman: Update

A federal judge ordered Lou Pearlman, creator of the Backstreet Boys and 'N Sync to remain in custody while attorneys prepare his case, because the U.S. Attorney's office opposed bail for Pearlman saying he was a "serious flight risk."^[1] Pearlman faces charges of defrauding a bank out of $20 million, and will be represented by the federal public defender's office.^[2]

Pearlman was escorted by federal marshals from Los Angeles to Orlando on Tuesday.^[3] Since his arrest in Indonesia last month, he has been expelled from Bali after the FBI contacted authorities there, then transferred to U.S. custody and flown to Guam, and later to Los Angeles.^[4]

He was indicted on three counts of bank fraud and single counts of mail and wire fraud for business he did with an Indiana-based Integra Bank N.A., and he has been accused of fraudulently securing millions in bank loans with documents from a fake accounting firm.^[5]

Florida investigators separately allege that he defrauded more than 1,000 individual investors out of more than $315 million.^[6]

We have previously discussed this case here.
We have previously discussed bank fraud, here.

---

^[1] AP Staff, Boy band mogul Lou Pearlman arrives in Florida to face fraud charges; ordered held in jail, Associated Newswire, July 12, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.

Jury Deliberates in Black Fraud Trial

The jury has begun deliberating in the fraud and racketeeting trial of former media mogul Conrad Black.^[1] The panel has been in court for three months of testimony, more than 40 witnesses about 30 hours of closing statements and the presentation of hundreds of documents in the trial of Black and three other Hollinger executives.^[2]

The jury will be considering all 43 of the charges, which include mail and wire fraud, obstruction of justice, racketeering and tax fraud; there are 13 counts against Black, 11 against each of former Hollinger International executives Jack Boultbee and Peter Atkinson and eight against former company lawyer Mark Kipnis.^[3]

The key issue in this case rests on non-compete payments from sales of Hollinger newspapers which were made in exchange for promises not to compete in the same markets where the papers circulated.^[4] Such agreements are not unusual in the publishing industry, but prosecutors say the money should have gone to Hollinger's shareholders, not the executives.^[5]

As they deliberate, the mostly female jury was instructed that it must decide whether prosecutors have proven beyond a reasonable doubt that Black and the others intentionally lied to enrich themselves at the expense of Hollinger International shareholders.^[6]

Obstruction of Justice
Under 18 U.S.C. § 1519, any person who falsifies documents with the intent to impede, obstruct, or influence the investigation of any matter within the jurisdiction of a department of the United State can be fined, imprisoned for 20 years, or both.

Racketeering
Racketeering is generally covered by 18 U.S.C. § 1951 wherein it states that interference with commerce by threats or violence is a crime that occurs when a person, in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both.

Racketeering charges should be differentiated from RICO charges. Racketeering is the interference of commerce through threats of violence.^[7] RICO charges,^[8] on the other hand, concern organized crime and systematic racketeering activity infiltration into legitimate organizations. However, because the statutes are written loosely enough to be applied to drug traffickers, it would not surprise us to find out that the individuals in question in this case had been charged under the RICO statutes, rather than solely under the racketeering statutes.

---

^[1] Romina Maurino, In the jury’s hands, The Canadian Press, June 28, 2007, available at http://thechronicleherald.ca/Canada/851159.html (last visited June 28, 2007)
^[2] Id.
^[3] Id.; AP Staff, A look at the Conrad Black trial, Associated Press Newswire, June 27, 2007, available at LEXIS, News Library, Wire News Services File.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] See 18 U.S.C. §§ 1951 et seq.; see also Id. § 1961(a) (“racketeering activity” defined).
^[8] Id. §§ 1961 et seq.

WV Lawyer Charged with Bank, Wire Fraud

A lawyer and her office manager were charged Tuesday with defrauding the West Virginia state Public Defender Services by submitting false vouchers totaling nearly $275,000.^[1]

Martinsburg, WV, lawyer Heidi J. Silver Myers, and Nancy P. Burkhart, were each charged with one count of conspiracy, 99 counts of mail fraud and 12 counts of wire fraud.^[2] Myers owns Myers Law Group in Martinsburg and Burkhart is the firm's office manager; they are accused of conspiring to submit vouchers to Public Defender Services for court-appointed work that Myers did not perform.^[3] Other vouchers falsely billed the agency at the $45 per hour rate for attorney time when the work was performed by paralegals or other employees of the law firm; vouchers also were allegedly submitted for research, court hearings and other work when Myers actually was on vacation.^[4]

The women allegedly conducted the voucher scheme from July 2004 to July 6, 2006, and in the course of the scheme allegedly received $274,580.38 from Public Defender Services, between Jan. 24, 2005, and March 21, 2006.^[5]

If convicted of all charges, Myers and Burkhart each face up to five years in prison and a $250,000 fine on the conspiracy count. Each fraud count carries a maximum penalty of 20 years in prison and a $250,000 fine.^[6]

Bank fraud is committed when a person knowingly executes, or attempts to execute, a scheme or artifice, 1) to defraud a financial institution;^[7] or 2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; this shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.^[8]

Wire Fraud is a crime that takes place when a person, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.^[9]

---

^[1] AP Staff, Lawyer accused of defrauding public defender agency, Associated Press Newswire, Jun 19, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] 18 U.S.C. § 1344 (1)(2007).
^[8] Id. § 1344(2).
^[9] 18 U.S.C. § 1343 (2007).

Pearlman to Be Sent to Florida

Lou Pearlman The man responsible for creating the Backstreet Boys and 'N Sync agreed to be returned to Florida from Guam to face a federal bankruptcy charge, officials said Monday. Deputy U.S. Marshal Jimmy Disrow said Pearlman would be transported from the U.S. territory within 10 days - probably to Hawaii or California.^[1] From there, it could take two or three weeks before Pearlman arrives in Florida.^[2]

Pearlman was arrested in Indonesia last week on one count of bank fraud, after the FBI contacted authorities in Bali he was then extradited to the U.S. and flown to Guam.^[3] He is accused of fraudulently securing nearly $20 million in bank loans with documents from a made-up accounting firm.^[4] The criminal complaint against him was filed in March and unsealed last week.^[5]

He appeared before District Chief Judge Frances Tydingco-Gatewood on Monday and requested temporary liberty before being returned to Florida.^[6] Pearlman asserted that the Federal Detention Facility had subjected him to poor conditions and cited numerous ailments, including high blood pressure and a bad back; the request was denied after prosecutors successfully argued that the former music executive was a flight risk.^[7]

"He has the means to travel, your honor," said Assistant U.S. Attorney Marivic David, adding that Pearlman was found in possession of passport-size photos and residency information from Panama.^[8]

David Smith, the FBI's assistant legal attaché in Jakarta, testified against freeing Pearlman, arguing that Pearlman was booked under the alias "Incognito Johnson" at his hotel in Bali; Pearlman argued that using an alias was "normal in the industry" to stave off paparazzi and other media. He likened himself to Tom Cruise and Jennifer Lopez, saying they would never use their real names when booking a hotel.^[9]

We have previously discussed the crime of bank fraud, at length, here.

---

^[1] AP Staff, Boy-Band Mogul Lou Pearlman Appears At Hearing In Guam, Associated Press Newswire, June 18, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.

Tenn. State Sen. Aquitted on All Charges of Fraud

Tennessee State Sen. Jerry Cooper was acquitted by a federal jury on all charges in his fraud case The jury of 10 women and two men returned the verdict on the fourth day of the Democratic lawmaker’s trial on charges of bank fraud, mail fraud and conspiracy.^[1]

The charges stemmed from the 1999 sale of Cooper’s lumber mill to an Alabama businessman.^[2] Cooper did not testify, however his attorney, Jerry Summers of Chattanooga, told jurors in closing arguments that the government should have ended the investigation after the lumber mill buyer, Tony Auyer of Huntsville, pleaded guilty last year to several counts of fraud, conspiracy and money laundering and was sentenced to prison.^[3]

Last year a separate jury acquitted co-defendant James Passons of McMinnville in the borrowing conspiracy case. Passons testified he acted at Cooper’s request when he prepared an inflated appraisal that showed the 13.6 acres in southern Middle Tennessee included a rail spur, even though it did not.^[4] However Rita D. Phillips, the jury foreman, said as jurors left that the 45-minute deliberation was a "good discussion.....I think we feel very good about the agreement we reached....[there just] was not enough evidence [against Cooper.]"^[5]

We have previously discussed bank and mail fraud in this blog, as well as money laundering.

---

^[1] Bill Poovey, Sen. Cooper acquitted on all charges in fraud case, Associated Press Newswire, June 9, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.

Kristina Young Pleads Guilty to Identity Theft

Kristina Alysse Young was sentenced Thursday to 39 months in federal prison for fraud, identity theft and conspiracy, after pleading guilty to the offenses in March. Young, and two other women who had previously pleaded guilty, were accused of stealing mail and altering checks, which they tried to cash at stores in the San Joaquin County area of California.^[1]

According to Assistant United States Attorney Michelle Rodriguez, who was prosecuting the case, Young was convicted for her participation in a conspiracy to commit bank fraud with checks and financial information stolen from vehicles and U.S. Mail boxes.^[2] Young had been charged with forging identification cards in order to pose as other people, so that she could pose as payees or true account holders in order to cash the stolen and forged checks.^[3]

Young and her conspirators, altered the stolen checks, then forged and attempted to cash the checks to defraud retailers in the San Joaquin County area.^[4] She was convicted of one count of conspiracy, one count of bank fraud, and one count of aggravated identity theft.^[5]

Aggravated Identity Theft
Aggravated identity theft occurs when the crime of identity theft is coupled with another felony, here bank fraud. Under 18 U.S.C. § 1028A, if a person knowingly and unlawfully transfers, possesses, or uses a means of identification of another person in conjunction with the commission of a set list of felonies, that person will be punished as those felonies provide and that person will additionally be imprisoned for 2 years. If the felony happens to be a terrorism offense, that person will receive an additional 5 years of imprisonment.^[6] Furthermore, that person will not be placed on probation, nor will the term of imprisonment run concurrently, unless the court has been given discretion to do by the Sentencing commission.^[7]

---

^[1] Record Staff, ID theft nets woman 39 months, Stockton Record, June 08, 2007, available at http://www.recordnet.com/apps/pbcs.dll/article?AID=/20070608/A_NEWS/70607015 (last visited June 9, 2007).
^[2] DOJ News Release, McGregor W. Scott, United States Attorney Eastern District of California, March 1, 2007, available at http://www.usdoj.gov/usao/cae/press_releases/docs/2007/03-01-07YoungPlead.pdf (last visited June 9, 2007).
^[3] Record Staff, supra note 1.
^[4] DOJ Press Release, supra note 2.
^[5] Id.
^[6]18 U.S.C. § 1028A (2007).
^[7] Id.

Felon Chastises IRS for Making ID Theft So Easy: Soukas

Evangelos Dimitrios Soukas testified at a Senate Finance Committee hearing that he used stolen identities, phony tax information, and electronic filing applications to collect IRS refunds in 2000 and 2001, while he was on the run from the FBI.^[1] Apparently "an easy way to make money quickly" is to file phony federal tax returns.^[2] Soukas said he gained more than $47,000 in refunds in this manner because the IRS lacks strong security safeguards.^[3] One IRS agent who spoke to Soukas on the phone "found it hard to believe I was able to do what I was doing with no education in taxes, and … called me a genius," Soukas testified.^[4]

Soukas is serving a 92-month prison term for scams that defrauded identity theft victims, the government and banks of more than $1.1 million. He initiated the scam initially because it was so simple.^[5] He would file multiple federal tax returns online using stolen identities; he got his money within days through refund anticipation loans.^[6] The IRS wired refunds to a bank account in his name, even though some of the refunds were listed in the names of identity theft victims, Soukas testified.^[7]

Soukas questioned why the IRS does not require a personal identification number or use of a mother's maiden name as a security measure for electronic returns.^[8] "There should be some type of extra measure to safeguard the people's tax records, in my opinion," he testified.^[9]

Finance Committee Chairman Max Baucus, D-Mont., called the ease of Soukas' crimes "a mark of the government's failure to protect taxpayers……[w]hy doesn't the IRS do something about that?"^[10] IRS Commissioner Mark Everson asserted that the safeguards would be expensive to implement and could "be damaging to the interests of many legitimate taxpayers" by making filing more difficult.^[11]

This falls in line with what we discussed here on this blog earlier this week, and this is further proof that in the wake of the Sept. 11 terror attacks Bush administration has refocused the FBI on fighting terror which has left far fewer agents to target the cases the bureau has traditionally pursued, such as fraud.

We have extensively discussed Bank Fraud, Identity theft and Wire fraud previously in this blog.

---

^[1] Kevin McCoy, Scamming IRS 'pretty easy,' felon says, USA Today, Apr. 13, 2007, available at http://www.usatoday.com/money/perfi/taxes/2007-04-12-tax-fraud-sidebar-usat_N.htm (last visited Apr. 13, 2007).
^[2] Id.
^[3] Id.
^[4] Id
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.

Since 9/11 FBI Priorities Not on Fraud

If it seems like sophisticated fraud and other white-collar crime is on the rise that may be because it is. In the wake of the Sept. 11 terror attacks Bush administration has refocused the FBI on fighting terror and this has left far fewer agents to target the cases the bureau has traditionally pursued.^[1] It adds up to thousands of white-collar criminals nationwide who are no longer prosecuted in federal court, frustrated victims and potentially billions of dollars in fraud and theft losses.^[2]

More than five years after the 2001 attacks, the Justice Department has failed to replace at least 2,400 agents detailed to focus on counterterrorism.^[3] "Politically, this trade-off has been accepted…but do the American people know this trade-off has been made?" said Charles Mandigo, a former FBI congressional liaison.^[4]

While the U.S. Justice Department and the Office of Management and Budget steadfastly deny that traditional criminal enforcement by the FBI hasn't suffered.^[5] The Seattle Post-Intelligencer(P-I) ran a six-month investigation and analyzed more than a quarter-million cases touched by FBI agents and federal prosecutors before and after Sept. 11, 2001.^[6] Among their key findings:

• Overall, the number of criminal cases investigated by the FBI nationally has steadily declined. In 2005, the bureau brought slightly more than 20,000 cases to federal prosecutors, compared with about 31,000 in 2000 - a 34 percent drop.^[7]
• FBI investigations of white-collar crime have also plummeted. In 2005, the FBI sent prosecutors 3,500 cases - a fraction of the more than 10,000 cases assigned to agents in 2000.^[8]
• Had the FBI continued investigating financial crimes at the same rate as it had before the terror attacks, about 2,000 more white-collar criminals would be behind bars, according to the P-I analysis, which was based on Justice Department data from 1996 through June 2006.^[9]

A report in September 2005 by the Justice Department's inspector concluded that the FBI "reduced its investigative efforts related to traditional crimes by more than 2,400 agents."^[10] The report asserted that in addition to the 1,143 agents transferred away from traditional crime programs, the FBI used 1,279 agents on counterterrorism work, even though they were on the books as criminal-program agents.^[11] Over the past eight years, the ranks of FBI agents have increased, from about 11,000 to 12,575, and virtually all of them are assigned to anti-terrorism duties.^[12]

---

^[1] Seattle P-I: FBI's terror focus leaves fewer agents on crime, Associated Press Newswire, Apr. 11, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Paul Shukovsky, The success of counterterrorism efforts difficult to evaluate, Seattle Post-Intelligencer, Apr. 10, 2007, available at http://seattlepi.nwsource.com/local/311085_terrorside11.html (last visited Apr. 11, 2007).
^[3] Id.
^[4] Id.
^[5] AP, supra note 1 (“The administration strongly disagrees that the FBI has been anything less than effective in the years since 9/11 in combating domestic crime issues…..[w]e have worked to achieve a balance between the FBI's homeland security and criminal investigative missions."said OMB spokesman Sean Kevelighan.)
^[6] Shukovsky, supra note 2.
^[7] Id.
^[8] Id.
^[9] I.d
^[10] AP, supra note 1.
^[11] Id.
^[12] Id.

Byrd Brothers Plead Guilty to Bank Fraud

Last year James and Eric Byrd admitted to defrauding seven banks by using false mortgage information and bad checks; they were sentenced Tuesday, April 3, in a multimillion-dollar bank fraud case.^[1] The banks lost between $2.5 million and $7 million dollars in the scheme, a third person whose identity remains unreleased has also been connected to the case. The Byrds have agreed to testify against the third person.^[2]

However the two men were not using all the money for their own personal bank accounts.^[3] They made several charitable contributions to the community, for example James Byrd started a scholarship fund to help kids go to college and at Christmas, gave thousands of dollars to families in need.^[4]

Prosecutors assert that the Byrds' crimes have are more harmful than beneficial.^[5] The men bought real estate and renovated or built new buildings; in the process they used several schemes to make their finances appear better so banks would lend them more money.^[6] "A lot of what they were doing is purchasing low-income housing and then selling it to one of their corporations or selling it to a family member two or three times and each time the price went up. And so the banks would then loan a number -- a value -- on a piece of property where the property was only worth a small amount -- a portion of that loan," according to Federal prosecutor Walt Wilkins.^[7]

The brothers were convicted of bank fraud and conspiracy to commit bank fraud, they were sentenced to five years plus three months in prison and ordered to pay more than $5.6 million in restitution.^[8] They have already paid back about $190,000.^[9]

We have previously discussed the federal crime of bank fraud here.

---

^[1] Brothers Sentenced For Multimillion-Dollar Bank Fraud, WYFF4.com, Apr. 3, 2007, available at http://www.wyff4.com/news/11510802/detail.html (last visited Apr. 3, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Brothers who admitted bank fraud ordered to repay $5.6M, Charleston Post & Courier, Apr. 04, 2007, available at http://www.charleston.net/assets/webPages/departmental/news/Stories.aspx?section=localnews&tableId=137403&pubDate=4/4/2007 (last visited Apr. 04, 2007)
^[7] WYFF4, supra note 1.
^[8] Id.
^[9] Id.

Former Reagan Aid Charged in Massive Fraud: Stockman

David Stockman began his assent to prominence whilst he was the budget director from 1981 to 1985 under former President Reagan.^[1] He made headlines early in his tenure when he told an interviewer that he thought Reaganomics was a "Trojan horse" for the rich and (correctly) predicted huge budget deficits.^[2]

His reputation has slipped once again in his slow decent from prominence, as he was charged Monday, March 26, with overseeing a comprehensive fraud at a troubled auto parts supplier that he led before the company collapsed into bankruptcy. Stockman was one of four former top Collins & Aikman Corp(C&A) executives named in a federal indictment unsealed Monday; the other four have already pleaded guilty.^[3] C&A, a firm that makes auto interiors, carpets, acoustics, fabrics and convertible tops, cooperated in the investigation and was rewarded with a deal that calls for the company not to be prosecuted if it continues to help the government.^[4]

The indictment charged Stockman and three others with conspiracy to commit securities fraud,^[5] making false statements in annual and quarterly reports, making false entries in books and records,^[6] and lying to auditors as well as committing bank fraud,^[7] wire fraud^[8] and obstruction of an agency proceeding.^[9]

If convicted, the defendants could face up to 30 years in prison on the most serious charge.^[10]

Bank fraud is committed when a person knowingly executes, or attempts to execute, a scheme or artifice, 1) to defraud a financial institution;^[11] or 2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; this shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.^[12]

Wire Fraud is a crime that takes place when a person, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.^[13]

Obstruction of justice is defined in pertinent part in18 U.S.C. § 1505 as a crime that occurs when the defendant, “with intent to avoid, evade, prevent, or obstruct compliance, in whole or in part, with any civil investigative demand duly and properly made under the Antitrust Civil Process Act, willfully withholds, misrepresents, removes from any place, conceals, covers up, destroys, mutilates, alters, or by other means falsifies any documentary material, answers to written interrogatories, or oral testimony, which is the subject of such demand; or attempts to do so or solicits another to do so…….Shall be fined under this title, imprisoned not more than 5 years.”

The crime of using Manipulative and deceptive devices, is defined in pertinenet part by 15 U.S.C. § 78j(b) where it state that it shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange; to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, or any securities-based swap, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

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^[1] Larry Neumeister, Ex-Reagan Official Charged in Fraud Case, AP (via PhillyBurbs.com), March 27, 2007.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] 18 U.S.C. § 371(2007).
^[6] 15 U.S.C. § 78j(b); 78ff (2007);17 CFR 240.10b-5; 18 U.S.C § 2 (2007)
^[7] 18 U.S.C. § 1344 (2007).
^[8] 18 U.S.C. § 1343 (2007).
^[9] 18 U.S.C. § 1505 (2007).
^[10] Neumeister, supra note 1.
^[11] Id. § 1344(1).
^[12] Id. § 1344(2).
^[13] Id. at § 1343.

Bank Fraud- Florida

A federal grand jury in Jacksonville earlier this year returned a seven-count indictment, charging U.S. Department of Treasury Inspector General for Tax Administration (TIGTA) Special Agent John Thomas, Jr. with one count of conspiracy, three counts of bank fraud, and three counts of making false statements on loan and credit applications. ^[1]

Thomas pleaded guilty to a charge of conspiring to defraud three banks of $106,000.^[2]

Between March 1999 and August 2000, Thomas obtained a loan from each of the three banks in the name of Zan Tan Man Enterprises, a purported computer service provider. ^[3] Thomas falsely claimed in loan applications that the company had more than $500,000 in annual revenue, several years of experience, and six to eight employees.^[4] The indictment alleged that Zan Tan Man Enterprises was actually a company Thomas created for the purpose of obtaining the three loans and that it had no revenue, no experience in the computer field, and no employees. ^[5]

Bank Fraud is the "criminal offense of knowingly executing, or attempting to execute, a scheme or artifice to defraud a financial institution, or to obtain property owned by or under the control of a financial institution, by means of false or fraudulent pretenses, representations, or promises." ^[6]

The maximum penalty Thomas can receive on the conspiracy count is up to five years in prison and a fine of up to $250,000. ^[7] The punishment for bank fraud under U.S.C § 1344 is a fine of not more than $ 1,000,000, imprisonment for not more than 30 years, or both.^[8]

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[1] Department of Treasury Special Agent Pleads Guilty to Bank Fraud Conspiracy, The U.S. Department of Justice via EarthTimes.org, February 23, 2007
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] BLACK'S LAW DICTIONARY 685 (8th ed. 2005).
[7] See Department, supra note 1.
[8] 18 U.S.C. § 1344 (2005).

Bank Fraud-Memphis, Tennessee

Karen Faye Wolfe, 60, a former Bank of America vault manager, who has been accused of embezzling $855,000 from a Tennessee vault, was arrested in Kissimmee, Florida by U.S. Secret Service agents and Osceola County deputy sheriffs on an arrest warrant.^[1] Wolfe was taken into custody without incident and immediately asked for an attorney. ^[2]Wolfe also agreed to waive an extradition hearing and return to Memphis.^[3]

Wolfe was put on the federal agency's "most-wanted" fugitives list last year after being accused of filling three large duffel bags with $20, $10 and $5 dollar bills from a cash-vault building. ^[4]On her last day at the bank, April 24, Wolfe was fired for "poor work performance," court documents say. ^[5] Co-workers noticed two entries in the vault system for $855,000 that made it look like the vault's account was balanced, the complaint said. ^[6] The "general ledger debit" and "cash out credit" tickets were fraudulent, bank officials said.^[7]"She circumvented the security system to access the cash vault and made the false [bookkeeping] entries to cover up her tracks," Assistant U.S. Attorney Vincent Citro told the judge at Wolfe’s hearing. ^[8]

The crime of bank fraud is covered by 18 U.S.C. § 1344 (2005). Under this statute, it is a crime for a person to "knowingly" execute, or attempt to execute, a scheme or artifice to defraud a financial institution; 18 U.S.C. § 1344(1) (2005), or to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises; id. § 1344 (2005).

If convicted, Wolfe faces up to 30 years in prison and a possible fine of up to $1 million.^[9]Wolfe had been the vault's operations manager since 1995 and joined Bank of America in 1977, bank officials told federal agents. ^[10]Cash vaults are not regular banks and collect commercial deposits from branches and customers through armored-courier services; they also conduct large cash transactions with federal reserve banks.^[11]

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[1] Pedro Ruz Gutierrez, Fired Bank-Vault Worker Doctored Books, Cops Say, Orlando Sentinel, January 26, 2007.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.

Bank Fraud, Identity Theft, and More—Alfred G. Bodden

A Moss Point, Mississippi, alderman—Alfred G. Bodden—has been arrested on a 13-count federal indictment alleging bank fraud, identity theft, and obstruction of justice. He was arrested yesterday afternoon by the FBI, and FBI spokeswoman Deborah Madden “said the charges stemmed from [his] ownership, until recently, of Al Bodden’s Supercenter, a car dealership.”^[1]

In total, he faces six counts of bank fraud, six counts of identity theft, and one count of obstruction of justice.^[2] He was given a court-appointed attorney and a trial date of November 6.^[3] That gives him a little over two months to prepare his case, or ask for a continuance.

Because the federal government has likely had far more than 2 months to prepare its case against the defendant, the defendant will likely want to “waive” his right to a speedy trial. We discussed some of these considerations in December.

In the ensuing time period, the Supreme Court of the United States, in Zedner v. United States, has had a chance to address the “waiver” of speedy trial rights.^[4] According to the Speedy Trial Act of 1974, a federal criminal trial must begin “within 70 days after a defendant is charged or makes an initial appearance.”^[5] In Zedner, the defendant’s trial did not begin within 70 days; in fact, “his trial did not commence until more than seven years after the filing of the indictment, but [he], at the suggestion of the trial judge, signed a blanket, prospective waiver of his rights under the Act.”^[6]

At issue in the case, in part, is whether the individual can “prospectively waive the application of the Act.”^[7] The Supreme Court held that an individual cannot.^[8] “Instead of simply allowing defendants to opt out of the Act, the Act demands that defense continuance requests fit within one of the specific exclusions set out in [18 U.S.C. § 3161(h)].”^[9]

We discussed this decision in greater detail when the decision was rendered in June.

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[1] Margaret Baker, M.P. Alderman Arrested, Biloxi Sun-Herald, Aug. 15, 2006.
[2] Moss Point Alderman Faces 13 Felony Charges; Pleads Not Guilty, WLOX.com, Aug. 15, 2006.
[3] Id.
[4] See Zedner v. United States, 126 S. Ct. 1976 (2006).
[5] Id. at 1980.
[6] Id. at 1981.
[7] Id. at 1985.
[8] Id.
[9] Id.