Three Plead Guilty in Email Scam; Wire and Mail Fraud

Three people have pleaded guilty to charges related to spam e-mail that promised U.S. victims millions of dollars from an estate and a lottery; in one scenario, it was asserted that the defendants sent e-mails purporting to be from an individual suffering from terminal throat cancer that needed assistance distributing approximately US$55 million to charity.^[1]

The three defendants, two from Nigeria and one from Senegal, sent spam e-mail to thousands of potential victims, in which they falsely claimed to control millions of dollars, located abroad.^[2] The fraud victims lost $1.2 million by giving the defendants advance fees.^[3]

In the throat cancer scheme, the defendants offered to give a 20 percent commission to the victim, or a charity of his or her choice, in exchange for the victim's help; the defendants would send a variety of fraudulent documents, including a "letter of authority" or a "certificate of deposit," making it appear that the promised funds were available, as well as pictures of an individual claiming to suffer from throat cancer.^[4] Defendant Anisiobi allegedly telephoned victims, disguising his voice to give the impression that he was suffering from throat cancer.^[5]

After obtaining their victims’ trust, the defendants asked them to wire-transfer payment for a variety of advance fees for legal representation, taxes and additional documentation. The victims then received nothing back.^[6]

Nnamdi Chizuba Anisiobi pled guilty to one count of conspiracy, eight counts of wire fraud and one count of mail fraud. Anthony Friday Ehis pled guilty to one count of conspiracy and five counts of wire fraud. Kesandu Egwuonwu pled guilty to one count of conspiracy, three counts of wire fraud and one count of mail fraud.

The maximum penalty for mail and wire fraud is 20 years in prison. The conspiracy charge carries a maximum penalty of five years in prison.

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.^[7]

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.

---

^[1] Grant Gross, Three Plead Guilty in Nigerian Spam Scheme, The New York Times, January 30, 2008, available at http://www.nytimes.com/idg/IDG_002570DE00740E18852573E000750D52.html?ref=technology (last visited January 30, 2008).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] 18 U.S.C. §1343 (2007).

Bittenbender Indicted for Theft of Trade Secrets and Wire Fraud

A federal grand jury has indicted a Matthew Bittenbender in an alleged scheme to rig federal aircraft fuel bids.^[1] Bittenbender is charged in U.S. District Court of Maryland with conspiracy to defraud the U.S. Department of Defense, conspiracy to commit wire fraud and conspiracy to steal trade secrets.^[2]

The government asserts that Bittenbender worked in 2005 at Avcard, a Hunt Valley firm that sells aircraft fuel to the government for military posts and other facilities.^[3]

He's accused of offering information about Avcard's bids to competing firms. The two other alleged conspirators were arrested Saturday in New York City; they, and their companies, are also named in the indictment.^[4]

Theft of trade secrets is covered under 18 U.S.C. § 1832. wherein it states that Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly 1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information; 2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information; 3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization; 4) attempts to commit any offense described in paragraphs (1) through (3); or 5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.^[5]

Section B of 1832 states that any organization that commits any offense described in subsection (a) shall be fined not more than$5,000,000.^[6]

---

^[1] AP Staff, Man Indicted In Alleged Bid Rigging Scheme, Associated Press Newswire, January 8, 2008, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] 18 U.S.C. § 1832(a)(2008).
^[6] Id. at §1832(b).

"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.

Federal Honest Services Fraud Crackdown Yields More Arrests

Roberto Ruiz, former managing director for the Bear Stearns Dallas office, and Christopher Chol-Su Pak, former vice president of the Bear Stearns Dallas office, pleaded guilty to charges related to an ongoing federal public corruption scandal in El Paso County.^[1]

Ruiz pleaded guilty to four counts of conspiracy to commit mail and wire fraud and a scheme to defraud the citizens of their right to the honest services of elected officials at the El Paso Independent School District, the El Paso Community College District, the city of El Paso and members of the El Paso County Commissioners Court.^[2]

Ruiz tried to bribe elected officials from those offices to win votes for particular vendors trying to do business with the city, according to his guilty plea.^[3] Pak pleaded guilty to engaging in a scheme to bribe county commissioners to win votes for a specific vendor.^[4]

The two are the latest officials accused of wrongdoing in a massive corruption investigation that became public earlier this year when federal agents raided the officials of County Judge Anthony Cobos, two commissioners and a local hospital board member.^[5]

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, which it is in Bryant’s case. 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
Mail Fraud is criminalized by 18 U.S.C. § 1341. Section 1341 is a rather dense and convoluted statute. Under this section, it is a crime for a person who has devised or intends to devise any scheme or artifice, to defraud, or to obtain money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice, to place in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or to deposit or cause to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or to take or receive therefrom, any such matter or thing, or to knowingly cause to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing.

Federal criminal defense attorney Douglas McNabb has previously discussed the federal crime of mail fraud in his blog; these posts can be found here. His discussions on wire fraud can be found here.

---

^[1] AP Staff, Former execs plead guilty in El Paso corruption case, Associated Press Newswire, December 22, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.

U.S. Post Office to Crack Down on International Email Fraud

The e-mails arrive from Nigeria, Russia, Holland or other countries. They assert inheritances, political strife, long lost loves, and some have resorted to death threats. The common theme, however, is that they all need to get money out of whatever country they are in and if you help, they promise to let you share the bounty.^[1] It would seem easy to write this off as a bogus piece of spam, but thousands of people believe these are real and lose, on average, $3,000 to $4,000 each.^[2]

Hoping to stem the losses, the U.S. Postal Inspection Service announced a massive international crackdown in which more than 540,000 fake checks with a face value of $2.1 billion have been seized.^[3] There have been 60 arrests in the Netherlands, 16 in Nigeria and one in Canada, the Postal Inspection Service said, and the effort is continuing.^[4]

Most of the cons start with e-mails telling of an inheritance or lottery win and ask the victim to help bring the money to the United States.^[5] The victim is asked to cash a check that comes in the mail and to send part of the money back to the person sending it, then that person disappears with the money and the original check bounces, leaving the victim with a loss.^[6]

Many of the cases originate in the Netherlands, where West African con artists operate from Internet cafes, said Johan Van Hartskamp, commissioner of the Amsterdam police. In what he called ''Operation Dutch Treat,'' police have arrested 60 people there, with three extradited to the United States and four more facing extradition.^[7]

This crime could possibly fall under email fraud, mail fraud, or wire fraud because it uses all those mediums to commit the fraud. Specifically mail fraud is an act of fraud using the U.S. Postal Service, such as making false representations through the mail to obtain an economic advantage. As actually defined by 18 U.S.C. § 1341, 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.^[8]

Similarly wire fraud would also cover the aforementioned crimes because wire fraud, which is covered under 18 U.S.C. §1343, is the act of 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 defense attorney Douglas McNabb has previously written about the federal crime of Email fraud in his blog, here

---

^[1] Randolph E. Schimd, Post Office Cracks Down On Fake Check Scam, Associated Press Newswire, October 3, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id., So far this year, averages of 800+ people a month have filed complaints about such scams.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] 18 U.S.C. § 1341(2007).
^[9] 18 U.S.C. §1343 (2007).

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).

Oil Exec Pleads Guilty to Wire Fraud Conspiracy

David Chalmers, a Houston oil executive, pleaded guilty Friday, Aug 18, to conspiracy to commit wire fraud in a plan to defraud the United Nations oil-for-food program out of millions by bribing to Saddam Hussein's Iraq regime.^[1]

Chalmers was the sole shareholder of Bayoil USA Inc. in Houston, was set to go on trial next month on charges he used a comfortable relationship with Iraq in the 1980s to secure oil contracts, and paid millions in kickbacks between 2000 and 2003 to ensure his participation in the oil-for-food program.^[2]

Ten people and five companies have been charged so far in connection with the plan to cheat the UN program of millions that should have been used for humanitarian aid.^[3] The oil-for-food program, which ran from 1996 to 2003, was created to help Iraqis cope with U.N. sanctions imposed after Saddam Hussein’s 1990 invasion of Kuwait.^[4] It let the Iraqi government sell oil primarily to buy humanitarian goods.^[5]

Chalmers told the judge that he allowed money to be illegally wired to Iraq through another agent at his company in the spring of 2001.^[6] He said that letters faxed to the UN during the same period did not disclose the illegal payments.^[7]

After Chalmers pleaded guilty, he also agreed to pay more than $9 million in restitution; his two companies, Bayoil USA and the Bahamas-based Bayoil Supply & Trading Ltd., also admitted to conspiracy to commit wire fraud.^[8]

He could have faced more than 60 years in prison if convicted and a maximum of 20 years for the conspiracy charge. Under the plea agreement, prosecutors will recommend a 37- to 46-month term when he is sentenced Nov. 19.^[9]

Federal criminal defense attorney Douglas McNabb has previously discussed the federal crime of wire fraud in this blog; these posts can be found here.

---

^[1] Amy Westfeldt, Texas Exec Plea Deal in Iraq Oil Scheme, Associated Press Newswire, August 18, 2007, available at available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.

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.

El Paso Public Corruption Investigation Goes Further Than Expected

Elizabeth “Betti” Flores, a former El Paso County commissioner pleaded guilty to conspiracy to commit mail fraud and wire fraud for accepting bribes in exchange for votes, the latest plea in an ongoing public corruption investigation.^[1]

In recent months, the FBI has raided the offices of El Paso County Judge Anthony Cobos, two county commissioners and other local officials, including Cobos’ former chief of staff. The latest plea came from former County Commissioner Flores, who admitted in her plea to taking bribes in exchange for votes on county contracts and other issues.^[2] According to one count, she was paid $10,000 to vote in favor of a contract for the $20 million El Paso County Parking Garage Annex and to advocate change orders to that contract. The contract was awarded in 2004.^[3]

Flores pleaded guilty Friday to four charges of conspiracy to commit mail fraud and the deprivation of honest services and two charges of conspiracy to commit wire fraud. Each count could bring her 20 years in prison.^[4]

Cobos’ former chief of staff, John Travis Ketner, pleaded guilty last month to corruption charges and claimed he was hired specifically to solicit bribes from vendors looking for county contracts.^[5] He filed an 18-page document in federal court implicating others and describing how a campaign donation, cash or trip could secure a lucrative taxpayer-funded contract.^[6]

We have previously blogged at length about the following crimes: Mail Fraud, Wire Fraud, and Public Corruption

---

^[1] AP Staff, Ex-El Paso Official Pleads to Corruption, Associated Press Newswire, July 9, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.

Enterasys Execs Sentenced in Securities Fraud Case

Four former executives of Rochester-based Enterasys Networks have been sentenced to federal prison in a fraud case.^[1] Enterasys Networks was formed in March 2000 as a spin-off of Cabletron Systems, and is still a networking company that caters to large enterprises. ^[2]

The executives were convicted of conspiracy and fraud during a December 2006 jury trial; evidence at trial showed that, starting in the summer of 2001, the four defendants and other Enterasys executives inflated Enterasys' revenue figures in order to satisfy the publicly reported expectations of Wall Street analysts and to increase, or at least maintain, the price of Enterasys stock.^[3] The defendants backdated and falsified documents and concealed material terms of business transactions from Enterasys' auditors in order to inflate revenues; the court found that public investors lost at least $97 million as a result of the fraudulent scheme.^[4]

At sentencing hearings Tuesday, U.S. District Court Judge Paul J. Barbadoro sentenced former Enterasys Chief Financial Officer Robert J. Gagalis to 11½ years in prison.^[5] Gagalis was convicted of one count of conspiracy, two counts of securities fraud, one count of making false statements to auditors of a public company, and four counts of wire fraud.^[6]

Bruce D. Kay, formerly Enterasys' senior vice president of finance, was sentenced to 9½ years in prison.^[7] The jury found Kay guilty of one count of conspiracy, two counts of securities fraud, one count of falsifying books and records of a public company, one count of making false statements to auditors of a public company, and three counts of wire fraud.^[8]

Robert G. Barber, a former Enterasys business development executive, was sentenced to eight years in prison and fined $25,000.^[9] The jury found Barber guilty of conspiracy, two counts of securities fraud, one count of falsifying books and records of a public company, and one count of making false statements to auditors of a public company.^[10]

Hor Chong "David" Boey, former finance executive in Enterasys' Asia Pacific division, was sentenced to three years in prison and three years of supervised release.^[11] Boey was convicted of conspiracy, two counts of securities fraud, one count of falsifying books and records of a public company, one count of making false statements to auditors of a public company, and two counts of wire fraud.^[12]

To prove a federal criminal securities fraud case, the government must prove beyond a reasonable doubt that: 1)the defendant used a device or scheme to defraud someone, made an untrue statement of a material fact, or failed to disclose a material fact which resulted in making the defendant's statements misleading; 2) the defendant's acts were, or failure to disclose was, in connection with the purchase or sale of securities; the defendant used the mail or telephone in connection with these acts or this failure to disclose; and the defendant acted for the purpose of defrauding buyers or sellers of securities.^[13] If the government successfully convicts the defendant on securities fraud charges, the defendant can be fined up to $1,000,000 (up to $5,000,000 if a corporation), imprisoned for up to 10 years, or both.^[14]

We have previously spoken about Wire Fraud here.

---

^[1] Seacoast Staff, Jail for former Enterasys execs, Four guilty of securities, SeacostOnline, July 04, 2007, available at http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20070704/NEWS/707040395/-1/BIZ (last visited July 4, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
[9] Id.
^[10] Id.
^[11] Id.
^[12] Id.
^[13] 15 U.S.C. §77a & 78a (2007).
^[14] 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).

Soloway Denied Bail: Update

U.S. Magistrate Judge James P. Donohue said Robert Soloway, of Seattle, should remain in jail until his trial scheduled for Aug. 6 because he has minimal ties to Washington state and has family in Sweden.^[1] "These are allegations of cyber crimes that have no geographical borders......It's just as easy to continue these actions in Sweden as it is in the United States." Donohue said.^[2]

Donohue continued, asserting that Soloway's previous actions demonstrated an unwillingness to abide by court orders, citing a cases in the past where Soloway continued his spamming even after Microsoft Corp. won a $7 million civil judgment against him in 2005 and a small Internet service provider in Oklahoma won a $10 million judgment.^[3]

Soloway's attorney, Richard Troberman, wrote in a court filing that the government's evidence that Soloway would flee was "woefully short on facts," and asserting that, in fact, Soloway has only traveled out of the country with his parents.^[4]

Soloway, who was given the moniker "Spam King" by federal investigators, was arrested May 30 on 35 charges including mail fraud, wire fraud, aggravated identity theft and money laundering.^[5] Mail fraud, wire fraud and money laundering are punishable by up to 20 years in prison; the government is also seeking $773,000 as proceeds of Soloway's activities.^[6]

We have previously discussed Money Laundering, here; Mail Fraud, here; Wire Fraud, here; and Identity Theft here.

We have also previously written on the case of Robert Soloway in this blog, this can be accessed here.

---

^[1] Annie Flanzraich, No Bail for Alleged 'Spam King', The Associated Press Newswire, June 13, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.

Former DOJ Employee Pleads Guilty to Wire Fraud

Jesse D. Lane Jr., who is a former civilian employee of the Department of Defense (DOD) and former member of the California Army National Guard, has pleaded guilty, on June 6, to defrauding the United States and conspiring with four other individuals in the process.^[1]

Lane admitted that he and his co-conspirators were members of the 223rd Finance Detachment,^[2] and were deployed together to Iraq and Kuwait from March 2004 until February 2005.^[3] When they got back to California, beginning in March 2005, and continuing through August 2005, Lane admittedly accessed a DOD pay-processing computer system to input thousands of dollars in unauthorized DOD pay and entitlements for himself and his co-conspirators.^[4] In return, Lane’s co-conspirators paid at least half of the money they received to back to Lane.^[5]

On Nov. 13, 2006, Lane’s co-conspirators Jennifer Anjakos, Lomeli Chavez, Derryl Hollier and Luis Lopez each pleaded guilty to one count of conspiracy to commit wire fraud on related charges arising from the transaction.^[6] Lane pleaded guilty in federal court in Los Angeles to one count of conspiracy and one count of honest services wire fraud. Lane faces a maximum penalty of five years in prison for conspiracy, 20 years in prison for honest services wire fraud, and three years of supervised release. Sentencing was set for Sept. 24, 2007.^[7]

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.^[8]

Honest Services
18 U.S.C. § 1346, which generally provides that for purposes of federal mail and wire fraud statutes (18 U.S.C. §§ 1341 and 1343), a "scheme or artifice to defraud" includes a "scheme or artifice to deprive another of the intangible right to honest services."^[9] 18 U.S.C. § 1346 was enacted in 1988 to reverse the decision of the Supreme Court McNally v. U.S.^[10] Thus by enacting 18 U.S.C. § 1346, Congress restored "honest services" to the realm of federal mail fraud and wire fraud statutes.^[11] This means that a scheme to deprive the public of "honest services" by a public official can be punished as mail or wire fraud (assuming that such an instrumentality was used as part of the scheme or artifice).^[12]

---

^[1] DOJ Press Release, Former DOD Employee Pleads Guilty to Charges Involving Fraud and Theft from the Army, Media-Newswire.com, June 6, 2007, available at http://media-newswire.com/release_1051800.html (last visited June 10, 2007).
^[2] This is a unit of the California National Guard that processes pay for Army National Guard members.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] 18 U.S.C. §1343 (2007).
^[9] 18 U.S.C. § 1346 (2007).
^[10] Ian D. Lanoff, Mark C. Nielsen, "Honest Services" Fraud – Strong Medicine for "Pay to Play," Groom Law Group, NAPPA Winter Meeting,
February, 2006, available at http://www.groom.com/_library/downloads/NAPPAArticle-Feb2006.pdf (last visited June 10, 2007); McNally v. U.S., 483 U.S. 350, 355 (1987). In McNally, the Supreme Court overruled a long line of lower court decisions by holding that the federal mail and wire fraud statutes did not encompass schemes to defraud citizens of an intangible right to honest government service from pubic officers.
^[11] Lanoff & Nielsen, supra note 10
^[12] Id.

Top Spammer Arrested; Soloway

Robert Alan Soloway has been described as one of the world's top spammers; he is one of the people who fills your email in box with junk everyday.^[1] He was arrested in Seattle, Wednesday, May 30, and federal authorities believe that this will lead to an immediate, perceptible decrease in the amount of junk e-mail flying around the Web.^[2] ''He's one of the top 10 spammers in the world,'' said Tim Cranton, a Microsoft Corp. lawyer who is senior director of the company's Worldwide Internet Safety Programs. ''He's a huge problem for our customers. This is a very good day.''^[3]

Soloway's arrest came a week after a federal grand jury returned a 35-count indictment charging him with mail fraud, wire fraud, e-mail fraud, aggravated identity theft and money laundering.^[4] In court Wednesday afternoon, Soloway pleaded not guilty to all charges; he has been accused of using networks of compromised computers to send out millions upon millions of junk e-mails.^[5] It is alleged that he has been doing this for 4 years, and he continued his activities despite a $7 million civil judgment against him in 2005 won by Microsoft, and another by Robert Brauer, the operator of a small Internet service provider in western Oklahoma, who won a $10 million judgment.^[6]

The case is the first in the country in which federal prosecutors have used identity theft statutes to prosecute a spammer for taking over someone else's Internet domain name, and it would mean at least an extra two years on Soloway's sentence if he is convicted.^[7] He could face decades in prison, though prosecutors said they have not calculated what guideline sentencing range he might face.^[8]

However despite the arrest, junk e-mail continued to land in mailboxes around the world Thursday, May 31.^[9] Even if Soloway is ultimately convicted and his operations shuttered, spam experts say dozens are in line to fill the void. This is mostly a symbolic arrest, and it is unlikely to significantly effect the spam traffic worldwide.^[10]

Soloway, was once on a top 10 list of spammers kept by The Spamhaus Project, an international anti-spam organization.^[11] Others have since topped him, mostly based in Russia and other countries out of reach of U.S. or European law.^[12] "Most of the Russian gangs seem to have a lot more freshly hijacked computers and are able to deliver much more spam into people's inboxes," said Vincent Hanna, a European investigator for Spamhaus.^[13]

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.^[14]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.^[15]

E-mail Fraud
E-mail fraud is covered under 18 U.S.C. § 1037. This statute makes it illegal for a person to, in or affecting interstate or foreign commerce, knowingly: (1) accesses a protected computer without authorization, and intentionally initiates the transmission of multiple commercial electronic mail messages from or through such computer;^[16] (2) uses a protected computer to relay or retransmit multiple commercial electronic mail messages, with the intent to deceive or mislead recipients, or any Internet access service, as to the origin of such messages; ^[17](3) materially falsifies header information in multiple commercial electronic mail messages and intentionally initiates the transmission of such messages;^[18] (4) registers, using information that materially falsifies the identity of the actual registrant, for five or more electronic mail accounts or online user accounts or two or more domain names, and intentionally initiates the transmission of multiple commercial electronic mail messages from any combination of such accounts or domain names;^[19] or (5) falsely represents oneself to be the registrant or the legitimate successor in interest to the registrant of 5 or more Internet Protocol addresses, and intentionally initiates the transmission of multiple commercial electronic mail messages from such addresses.^[20]

---

^[1] AP Wire, Feds in Seattle arrest man described as one of world's top spammers, Associated Press Newswire, May 30, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Anick Jesdanun, Spam Flows Despite High-Profile Arrest , Associated Press Newswire, May 31, 2007, available at LEXIS, News Library, Wire News Services.
^[10] Id.
^[11] Id.
^[12] Id.
^[13] Id.
^[14] 18 U.S.C. § 1028A (2007).
^[15] Id.
^[16] 18 U.S.C. § 1037(a)(1)(2007).
^[17] Id. at §1037(a)(2).
^[18] Id. at §1037(a)(3).
^[19] Id. at §1037(a)(4).
^[20] Id. at §1037(a)(5).

Man Uses Online Dating Services to Commit Wire Fraud: Giblin

Patrick Giblin used membership lists of online dating services, where he focused on women who were near despair because of family tragedies.^[1] He promised them love and affection if only they would send him money, sometimes as little as $450; once as much as $50,000.^[2] In every case he used the cash to fuel a gambling addiction; Giblin admitted as much when he plead guilty last year to 10 federal wire fraud charges.^[3]

Two of Giblin's victims, spoke at the sentencing and asserted that they were promised that he would move, sometimes with a job in law enforcement, and was interested in marriage.^[4] Neither of the women ever met Giblin, but both eventually turned over their savings to him when he called with stories of broken-down cars, blown-out tires and traffic tickets -- all of which could be paid off and clear the way for him to proceed to the victim's hometowns.^[5]

To hear him tell it, the slot machines at Caesar's Atlantic City ruined Gilblin’s life, estranged him from his family and forced him to beg for money.^[6] Gilblin told U.S. District Judge Robert Kugler that he needed a program to help fight an addiction that began when he was 19.^[7] Kugler however said gambling was no excuse, asserting that he “couldn’t mend the broken hearts of the victims or restore their self-esteem. If you were working an honest job and throwing your money away at the casino, no one would care. But you're stealing."^[8]

On Tuesday, Giblin was sentenced to 115 months in federal prison and ordered him to make $182,442 in restitution to 25 victims.^[9] Giblin must also remain on parole for three years after he completes his sentence, during which time he will be barred from gambling and must register for self-exclusion from casinos.^[10]

We have discussed the crime of Wire Fraud extensively in this blog; these discussions can be found here.

---

^[1] Renee Winkler, Man gets 10 years for wire fraud, Courier-Post Online (New Jersey), Apr. 18, 2007 available at http://www.courierpostonline.com/apps/pbcs.dll/article?AID=/20070418/NEWS01/704180384/1006 (last visited Apr. 17, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] 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.

NJ State Senator in Court Today on Fraud and Bribery Charges: Bryant

New Jersey State Senator Wayne Bryant is expected in federal court this morning, Apr. 9, where he will plead not guilty to fraud, bribery and pension-padding charges.^[1]

He is accused of using his clout as head of the Senate Budget Committee to steer millions in grants to two state schools that gave him no-show jobs.^[2] Bryant was named in a 20-count indictment accusing the senator with tripling his taxpayer-funded pension through jobs at the University of Medicine and Dentistry of New Jersey in Stratford (UMDNJ), Rutgers-Camden Law School and Gloucester County Board of Social Services.^[3]

Former UMDNJ dean R. Michael Gallagher, who was indicted along with Bryant also faces multiple fraud charges; the indictment alleges that Gallagher capitalized on Bryant's influence to become dean, then put Bryant on the school's payroll.^[4] In exchange, the senator, who at one time was one of Trenton's most powerful lawmakers, helped out the school's interests at budget time.^[5]

Bryant and Gallagher face mail and wire fraud charges that could result in lengthy prison terms and large fines if they are convicted.^[6] Bryant also faces bribery charges in connection with salaries he drew from jobs for which he allegedly performed little work.^[7]

Mail fraud
Mail Fraud is criminalized by 18 U.S.C. § 1341. Section 1341 is a rather dense and convoluted statute. Under this section, it is a crime for a person who has devised or intends to devise any scheme or artifice, to defraud, or to obtain money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice, to place in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or to deposit or cause to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or to take or receive therefrom, any such matter or thing, or to knowingly cause to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing.

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, which it is in Bryant’s case. 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.

Bribery Concerning Programs Receiving Federal Funds
Bryant is also being accused of violating 18 U.S.C. § 666(a)(2), which is bribery concerning programs receiving federal funds. A person commits a crime under this statute if they corruptly give, offer, or agree to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more.

A violation of section 1341 alone can result in a fine of up to $1,000,000, imprisonment for up to 30 years, or both.^[8] Bryant, faces a maximum of 20 years on each of the most serious charges, however, he could be exposed to a maximum of 150 years in prison if convicted on all charges and sentenced to consecutive terms, according to federal prosecutor William Fitzpatrick.^[9] Gallagher faces a maximum 220-year term if convicted on all counts and is sentenced to maximum consecutive terms for each.^[10]

Bryant is also accused of violating 18 U.S.C. § 1343 (Wire Fraud) which has been previously discussed here.

---

^[1] Staff, Bryant due in court this morning, Newark Star-Ledger, Apr. 9, 2007, available at http://blog.nj.com/ledgerupdates/2007/04/bryant_due_in_court_this_morni.html (last visited Apr. 9, 2007).
^[2] Id.
^[3] Angela Delli Santi, Bryant, UMDNJ dean to plead not guilty, Associated Press Newswire, Apr. 7, 2007, available at LEXIS, News Library, Wire News Services File.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] 18 U.S.C. § 1341 (2007).
^[9] Santi, supra note 3.
^[10] 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.

---

^[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.

Fake Art Auctions Bilks Buyers Out of Millions: Eubanks, Sullivan

Kristine Eubanks, and her husband, Gerald Sullivan, were charged Monday, March 5, with conspiracy to commit mail fraud, wire fraud and interstate transportation of stolen property.^[1] The couple admitted that they manipulated the auctions of art and jewelry by creating inflated bids, and that they purchased fake art, forged art at a print shop, and forged signatures of artists including Picasso, Chagall and Dali, and then sold the bogus works on their show.^[2] Prosecutors said the couple also created false appraisals and certificates of authenticity.^[3]

The couple's operation ran through a satellite television show "Fine Arts Treasures Gallery." The government estimates that the show defrauded more than 10,000 people of more than $20 million for spurious art. Investigators seized around $4 million when Eubanks and Sullivan were arrested during a raid in September.^[4]"The defendants in this case have admitted to profiting by preying on the vulnerabilities of producers and consumers of art through an elaborate criminal enterprise," said J. Stephen Tidwell, assistant director of the FBI in Los Angeles.^[5]

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.

Wire fraud, which is a crime under 18 U.S.C. § 1343, makes it a crime for a person to devise a scheme or artifice to defraud and use wire, television, or radio communication technologies to carry out the scheme. Violating section 1343 can be punished by a fine, imprisonment for up to 20 years, or both. If a financial institution is harmed in the commission of the fraud, the fine can be as high as $1,000,000 and the prison sentence can be up to 30 years.

Under 18 U.S.C. § 2314, it is a crime for a person to transport any good in interstate or foreign commerce with a value of at least $5,000, knowing that that good is stolen.

Eubanks could face up to 10 years in federal prison; Sullivan up to six. Eubanks has been in custody since the September raid because she was on probation at the time.^[6]

---

^[1] Brett Zonfker, TV art scam bilked buyers of millions, AP (Via Akron Beacon Journal), March 06, 2007
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.