Articles Posted in White Collar Crime

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Despite the havoc that has occurred with the economy, mortgages and the banking system over the last several years, no Wall Street executives have been prosecuted since the economy went down the drain in 2008. One can only imagine the fraud and illegalities that were occurring to have such a significant effect on our financial system. It seems logical that the federal government might be able to find a couple people who broke the law as billions of dollars in wealth were erased from people’s accounts and pensions. However, as of today, not one Wall Street executive has been prosecuted in criminal court.

A recent article in the Washington Examiner suggests that conflicts of interest with the Department of Justice are to blame for the lack of prosecutions. As is often the case, when a new president takes over, he appoints people from the largest financial institutions and law firms to positions of power in government. These people worked for the companies who may have broken the law or worked with the executives who might be the targets of federal white collar crime prosecutions or represented those same companies and executives at their law firms. For example, as the article points out, Attorney General Eric Holder used to work for the law firm of Covington & Burling which represents Goldman Sachs, Bank of America, Citigroup and many others. When those relationships exist among the people making the decisions to prosecute white collar crimes and the people and companies potentially committing the white collar crimes, you can see why the following counter-intuitive situation exists today: according to the article, financial fraud prosecutions by the Department of Justice are at a twenty year low even though there seems to be more questionable financial dealings than ever.

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In an uttering a forged check case near Jacksonville, Florida, the defendant was charged with allegedly going into a bank and cashing a check that was forged. Once the bank realized the check was forged, they called the police. The police officer obtained the check and saw that it was endorsed in the name of the defendant. They also obtained the video footage from the camera positioned at that teller station. When the police officer saw the name on the check, he went to the driver’s license computer system and obtained a picture and signature for the suspect. The police officer determined that the signature on file with the DMV matched the signature on the forged check. He also concluded that the picture on file with the DMV matched the video footage of the suspect in the bank.

At the trial of the defendant for uttering a forged check, the defendant’s picture and signature on file with the DMV were shown to the jury along with the signature on the check and the bank video. The police officer was allowed to testify that, in his opinion, the signatures and the photo and video matched. The jury convicted the defendant of uttering a forged check.

The conviction was reversed because the police officer’s testimony was improper. The police officer was not at the bank when the check was cashed and had never seen the defendant before. He had no specific knowledge about the defendant. He also had no special training or expertise in handwriting analysis or video identification. In other words, his opinion was nothing special. The jury was equally capable of deciding if the defendant was in the video and it was his signature on the check. More importantly, that is the jury’s job (not a police officer who was not an eyewitness to the crime) in a criminal case. Because the police officer attempted to substitute his non-expert opinion for the jury’s and tried to assume the jury’s role, his testimony was improper and the conviction was reversed.

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A crime that is not commonly charged but still exists in Florida deals with a person accessing a computer without authorization to take trade secrets or other confidential data. This came up in a recent criminal case after the defendant was charged with accessing her company’s client list, downloading it to her private computer and then using the client list for purposes not permitted by the company.

The defendant was actually charged with two crimes: 1) unlawfully accessing a computer database, and 2) obtaining trade secret or confidential data. Both charges are third degree felonies and are punishable by up to five years in prison. The first charge, unlawfully accessing a computer database, involves knowingly accessing, disrupting or destroying a computer or computer network without authorization. This obviously includes hacking into a computer system without authorization to view or take computer data. The second charge, obtaining trade secret or confidential data, involves knowingly taking or disclosing data that are considered trade secrets or confidential under Florida law that exists on a computer or computer network without authorization.

In this case, the defendant was not convicted of unlawfully accessing a computer database since she was an employee and had the right to access the information. However, she was convicted of obtaining trade secret or confidential data because she was not entitled to take the data and transfer it to her own computer for her own use.

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State of the address time often means the announcement of a new unit or task force to address crimes that have been occurring with increasing regularity for some time prior to the announcement. The 2012 speech was no exception. In last month’s address, President Obama announced the creation of a new unit designed to investigate fraud crimes. Specifically, the new unit will apparently be focusing on mortgage fraud and securities fraud cases.

The new unit will be referred to as the Unit on Mortgage Origination and Security Abuses. it is not exactly clear why this new unit was created when President Obama announced the creation of an ostensibly similar task force back in 2009- the Financial Fraud Enforcement Task Force. It could be that this new task force/unit is more specialized in the areas of greater need and is a subunit of that larger task force.

The new unit will be comprised of state and federal law enforcement officials. Among other duties, they will be looking at people they allege contributed to the financial crisis by combining and selling mortgage-backed securities.

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The law firm of Shorstein & Lasnetski, LLC in Jacksonville, Florida handles all variations of white collar crimes. One of the cases for which our clients often request representation is the crime of mortgage fraud. As a result of handling a large number of mortgage fraud criminal cases, we have noticed that the police often charge defendants for negligent, and often common, mistakes made during the mortgage application process that do not rise to the level of criminal conduct. Other times, the state may prosecute a mortgage fraud case when a person does make an incorrect statement, but the false statement has no effect on the approval for the mortgage loan.

For instance, in a recent case south of Jacksonville, Florida, the defendant obtained a mortgage to build a home on a vacant lot. He found a mortgage broker and completed the loan application. In each of the documents during the application process and at the closing, the defendant stated his gross monthly income as $9,800 per month. According to the state, the defendant’s gross monthly income shown on his tax returns was less than $9,800 per month. The state then jumped to the conclusion that the defendant gave false information on his mortgage application and therefore committed mortgage fraud by inflating his income to get a higher loan amount.

Under Florida law, a person can be convicted of obtaining a mortgage by false representation, aka mortgage fraud, where a person makes a false statement in order to obtain a mortgage and the victim relies upon the defendant’s false statement.

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Over the last several years with the ever-increasing deficit becoming more and more of a issue in the media, the federal and state governments have focused more on crimes that involve fraud, including fraud that involves government benefits. There may be no bigger crime involving fraud and government benefits at any time in our history than Medicare fraud.

Medicare is a government funded insurance program that assists approximately 46 million of the elderly and disabled with health care. One report estimated the total amount of Medicare fraud at $60 billion as of 2009. We have seen many cases where state and/or federal law enforcement officials have investigated and arrested doctors, medical center owners, executives and employees and patients for allegedly committing various versions of Medicare fraud. One of the most common methods of committing Medicare fraud occurs when a doctor or other employee sends a Medicare reimbursement form to the government for medical services or equipment that were unnecessary or never provided.

Recently the federal government announced that 91 people in eight different cities were charged with committing Medicare fraud in an amount totaling approximately $300 million. Among those charged were many doctors accused of seeking reimbursement for medical services that were never provided. As an example, one doctor is accused of billing Medicare for medical services allegedly provided to dead people.

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We have discussed how the various law enforcement agencies seem to follow the issues of the day when making priorities out of certain crimes. While violent crimes are normally always priorities, when it comes to theft or white collar crimes, different crimes seem to grab the attention of the police at different times. When there is a huge story about securities fraud in the news, then those cases seem to pop up more often. When the housing bubble collapses and issues relating to mortgages make the news, mortgage fraud seems to be the most important crime to law enforcement officials. Today, high unemployment numbers are frequently discussed in the news. Predictably, we recently saw a story indicating the police have started cracking down on unemployment compensation fraud cases.

We have handled many unemployment compensation fraud cases in the Jacksonville, Florida area. Basically, in those cases the police allege that someone obtained unemployment compensation benefits when they were not entitled to them or for a time period longer than the entitlement. Often, the police claim that the suspect kept receiving unemployment benefits after returning to the workforce. Based on our experience, evidence supporting these criminal allegations is often shaky.

However, the reason the police are making these crimes a priority is obvious. According to the article, losses from unemployment compensation fraud across the country amounted to $1.7 billion in 2010, and approximately 30% of the improper unemployment fraud payments were made to people that had returned to work. Additionally, the unemployment rate figures to remain in the news as it is sure to be a major topic of discussion during the upcoming presidential campaigns.

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With computer crimes becoming more prevalent as more people obtain computers and similar networking devices, state and federal governments are enacting new laws to respond to the increasing number of crimes. The Obama administration recently announced a new proposed law dealing with various cyber security issues. The new law would address several areas. It would establish a national, standardized data breach reporting system for businesses to notify customers when they have had a breach of their security systems where financial or identification information may have been lost. Currently, various states have different laws that may or may not require a company to notify a customer when there has been a breach in their security and potential loss of people’s financial and identification information.

The law would also set minimum sentences for people convicted of computer crimes related to hacking into networks and stealing information.

Finally, as we have seen in other contexts, the lines of communication among the various governmental departments that deal with cyber crimes are not exactly open, and it can be unclear which government agency is responsible for investigating the matter. When one government department will not share information with another, complicated cyber crimes often go unsolved. The new law will attempt to rectify that problem so the government can be more efficient in dealing with cyber crime. We’ll see how that goes.

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Police arrested eleven people alleging they were involved in mortgage fraud in various counties in North and Central Florida, including Flagler and Volusia Counties. The police are alleging that the individuals devised a scheme that involved straw buyers, realtors, appraisers and mortgage brokers. The group is alleged to have artificially inflated prices of homes with false appraisals and increased the amount of the loan by requesting additional funds for renovations that were never intended or executed. The excess money would be paid to the straw buyers and split among the people involved in the scheme. According to police, the buyers in these schemes never intend to live in or renovate the houses and the property is normally foreclosed upon not long after the closing. This particular mortgage fraud scheme reportedly involved 23 homes and $9 million.

Mortgage fraud cases have increased dramatically over the last few years after the housing crisis hit. During the housing bubble, banks were loaning large sums of money to anyone and everyone who filled out a mortgage application. Once housing values quit going up, banks realized they had a lot of bad loans on their books, and the mortgage crisis began to snowball. This is the exact kind of environment that prompts the government to go into reactive mode and initiate investigations into possible mortgage fraud. When everyone was making money (the banks were closing loans and the builders were selling houses), everyone was was happy, and mortgage fraud did not seem to be a problem. When everyone started losing money (loans were not getting paid and foreclosures skyrocketed), no one was happy, and the mortgage fraud investigations began in force. In the current environment, the various law enforcement agencies are focusing on any sort of irregularities in the mortgage loan process.

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We have clearly seen a shift in focus towards Medicaid fraud and other healthcare fraud cases by the state and federal law enforcement agencies over the last year or so. As news stories focus on the tremendous debts facing our states and country and the huge amounts of money involved in Medicaid fraud and healthcare fraud, the various law enforcement agencies follow suit with their investigations and prosecutions of healthcare fraud cases.

A recent press release from Eric Holder, the United States Attorney General, confirmed the government’s commitment towards making more cases against people suspected of Medicaid fraud and healthcare fraud. Mr. Holder noted that the government has collected more than $2.5 billion under the False Claims Act relating to health care fraud over the past fiscal year, which was a 50% increase over the prior year and the largest figure for any year. The government also initiated more than 2,000 criminal and civil healthcare fraud investigations and charged a record number of people with Medicaid fraud and healthcare fraud related crimes.

This press release confirms the trend we have seen for some time. The government, on a local, state and federal level, is really focusing on all aspects of healthcare fraud and making a record number of arrests. These arrests have involved anyone from the lower level employees to doctors, pharmacists and owners of the various medical facilities. If you have been contacted by anyone relating to a Medicaid fraud or healthcare fraud investigation and would like to speak with an attorney familiar with these matters, feel free to contact us for a free consultation.