Articles Posted in White Collar Crime

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Most people even marginally familiar with criminal law and evidentiary issues understand that there is a special relationship and privilege between a lawyer and his/her client and that a defendant’s lawyer would never be able to testify against the client in a criminal trial. However, that seemingly obvious conclusion may not always be so clear. It is fundamental that the prosecutor is not allowed to have a defendant’s lawyer testify against the client in a criminal case. However, whether the lawyer is actually that defendant’s lawyer leaves room for interpretation.

This ambiguity most often comes up in a case where a company and an employee(s) of the company are being investigated. A question may arise as to whether the defense lawyer represents the company or the employee. For the employee, it may be difficult to tell. The employee may believe the lawyer is his/her lawyer, but that lawyer may actually represent the company instead. In many cases, their company’s and the employee’s interests are the same making it difficult to distinguish the actual client. If that is the case, the communications between the employee and the company lawyer may not be privileged and confidential and may be accessible by the prosecutor.

In a pending criminal case out of Philadelphia, a CEO of a company was convicted of obstruction of justice and sentenced to 18 months in federal prison. During the trial, the prosecutor was allowed to call the CEO’s former lawyer to testify as to certain communications between the two that the CEO thought were privileged and confidential at the time. According to the CEO, he felt that he engaged the defense lawyer to be his individual lawyer, in which case all communications between the two should be privileged and confidential. However, the government alleged that the lawyer represented the company and was not the CEO’s individual lawyer in which case the lawyer-client privilege should not apply. The defense countered that the CEO reasonably believed that the lawyer was his individual attorney and the client’s/defendant’s belief controls whether the attorney-client privilege is in effect.

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As we have discussed several times on this blog, the federal government, and to a lesser extent the state government, focuses on different types of crimes depending on the prevailing attitudes and issues of the moment. We have seen the government shift its focus from terrorism to mortgage fraud to securities fraud to pain clinics to Medicare fraud. Currently, with the economy and the debt being such major issues, different types of fraud become primary issues for law enforcement. Medicare fraud is a perfect target because it is huge, it involves fraud and it involves stealing from the federal government.

Medicare fraud can take several different forms. One primary way to commit Medicare fraud is to submit Medicare reimbursement forms for medical equipment or medical services that were either never provided or were provided but were unnecessary. The government has no way to track the amount of Medicare fraud with any specificity. However, the government has estimated that the total amount of Medicare fraud in 2010 was close to $50 billion, although it is unclear how many of the cases that comprise that estimate turned out to be valid Medicare reimbursement requests.

The United States Department of Justice (DOJ) recently announced the arrest of 111 suspects for Medicare fraud related conduct. In the press release, the government indicated the arrests included doctors, nurses, health care executives and others in nine cities for Medicare fraud totaling approximately $225 million. The arrests were made by the DOJ’s Medicare Fraud Strike Force which includes hundreds of federal, state and local law enforcement personnel. Confirming the increased focus on Medicare fraud, the DOJ indicated the number of law enforcement officials devoted to making Medicare fraud arrests has quadrupled over the last two years. They claim the various Medicare Fraud Strike Force teams made hundreds of arrests and recovered $4 billion in taxpayer money in 2010.

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A federal grand jury recently indicted a group of people based on prosecutors’ allegations that they participated in a scheme to defraud mortgage brokers out of $1.8 million in thirteen different real estate transactions. The charges allegedly involve Access E-Mortgage, Inc., a company out of St. Augustine, Florida. Based on a recent article, the prosecutors are using the federal mail and wire fraud statutes to charge the individuals. The indictment charges a total of sixteen individuals allegedly involved in the scheme. According to the indictment, the scheme involved recruiting straw buyers who would give false information to the mortgage brokers to obtain loans. The loaned funds would then allegedly be stolen by the people involved in the scheme.

We have handled several recent cases involving alleged mortgage fraud over the last several months. As we discussed on our website before, the federal government has taken a greater interest in these cases and attributed more time, manpower and other resources to make mortgage fraud cases. This appears to be a reaction to the publicity the failing housing market and numerous foreclosures have had over the last couple of years. With the federal government, and the state and local government to a lesser degree, it seems like prosecutions in a particular area often follow the news of the day. As the housing market and foreclosures have become more of an issue in the media, the number of mortgage fraud cases have increased. Sometimes, this reaction to newsworthy issues can result in people being arrested and charged with crimes who have little to no involvement in the criminal activity. When the government casts a wide net, some innocent people often get caught.

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Federal authorities arrested a Gainesville, Florida man for allegedly creating a Ponzi scheme and stealing approximately $30 million from people who thought they were investing their money with the suspect in foreign exchange markets, according to an article on News4Jax.com. According to the article, the suspect solicited funds from people in Florida that he would purportedly use to invest in foreign currency markets and return up to 10% per month to the investors. He is charged with taking the money and spending the majority of it rather than investing it for the investors. The suspect is expected to be charged with wire fraud in federal court.

The term “Ponzi scheme” has become more mainstream ever since the highly publicized Berni Madoff case, and the federal government is usually very interested in these Ponzi schemes as a result. It generally refers to a scheme where someone or a group of people will pretend to have the ability, and intention, to invest large amounts of money in a great investment that will produce incredible returns. Ten percent per month would certainly qualify as incredible returns.

However, in a true Ponzi scheme, the person does not invest the money or only invests a portion of it. On the contrary, when the so-called investors are expecting returns on their investments or principal payments, the suspect will use the money from new investors to pay what appears to be profits and/or principal back to the old investors. This does two things to further the scheme. It satisfies the investors who are seeing what they believe is proof of their great investment. It also creates good publicity for the suspect which attracts new investors whose money can be used to pay the old investors. One problem with the Ponzi scheme is that it constantly requires new investors to pay off old investors. People want to see their profits, they want advances, they need their money back to pay for an emergency, and the suspect needs to come up with that money from some source. And the bigger the scheme gets, the harder it is to manage. In any case, when someone gets charged with being involved in a Ponzi scheme, it is often a federal case and very serious, particularly when the suspect does not have a lot of the money left to return to the victims.

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Harry Shorstein, recently the five term State Attorney for the Jacksonville, Florida area (encompassing Duval County, Clay County and Nassau County) and General Counsel for the City of Jacksonville, has been in private practice now for almost two years with Shorstein & Lasnetski. He has handled a wide variety of criminal defense matters but with a concentration on white collar crime cases and pain clinic cases in state and federal courts.

Shorstein & Lasnetski is excited to announce that Harry Shorstein was recently named by the U.S. News & World Report Best/Best Lawyers as their White Collar Criminal Defense Lawyer of the year for 2011 for Jacksonville, Florida. U.S. News & World Report/Best Lawyers chooses only one lawyer per specialty area per major city. U.S. News & World Report/Best Lawyers conducts many surveys from other attorneys in the area to determine who wins the Best Lawyers honor for the community. This award signifies the respect and admiration Harry Shorstein has received from his peers in this area for his work in white collar crime criminal defense in the Jacksonville, Florida area.

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Federal prosecutors recently charged 73 people, from Georgia to California, for allegedly defrauding Medicare out of $163 million, according to an article on Foxnews.com. The people arrested were apparently setting up fake doctor-patient relationships and billing Medicare for medical services that were never performed. More traditional Medicare fraud involves doctors or other medical professionals billing Medicare for medical services that are not necessary or never performed and medical devices that are not needed or used by the patient. However, in this case, the suspects apparently made up the whole thing. They are reported to have used stolen social security numbers and identification information to create patient accounts. They also allegedly used stolen identification information from doctors to make it seem like the facilities had actual doctors ordering the medical services and devices. Phantom medical facilities were also created where the fictitious patient visits were supposed to take place.

The authorities were alerted to this scheme when they matched up a large number of the social security numbers on the Medicare reimbursement forms with the social security numbers of Medicare patients who reported having their identification information stolen. In addition to that evidence, the Medicare reimbursement forms also showed that some of the medical treatment for which reimbursement under Medicare was requested, was ordered by the wrong kind of doctor. As an example, the article notes that the suspects asked Medicare for reimbursement for a pregnancy ultrasound performed by an ear, nose and throat doctor.

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As criminal defense lawyers in Jacksonville, Florida, we handle all varieties of criminal cases. Every now and then, the police will set up a sting or establish a particular focus on a particular crime. This often results in the arrest of people who actually commit that crime as well as people who did nothing wrong but get caught up in the enthusiasm of the Jacksonville police. One common example is the Jacksonville police’s focus on pulling people over for driving under the influence of alcohol or drugs (i.e. DUI) around holiday weekends like July 4th, New Year’s and Labor Day.

Lately, we have heard from clients about the police going after contractors for allegedly offering to do work they are not licensed to perform. And what we have seen is these cases appear to be very problematic. Many of these individuals who are arrested have occupational licenses that allow them to do a variety of maintenance and repair work on a person’s home. In order to do certain jobs, like plumbing and electrical, they need a more specialized license. In these cases, the police have someone posing as a homeowner who lures the contractors over by asking them over the phone to do work they are legally licensed to do, such as installing cabinets. When the contractor gets to the home, the police agent then does not want to discuss the cabinets but tries to get the person to agree to do other work, or atl east offer a price for the other work, such as the electrical or plumbing work. Even where the contractor refuses to do the work but throws out an estimate as to what it might cost, the police rush in and make the arrest.

Contractors in Jacksonville, particularly those who advertise on Craigslist, need to be careful what they say to prospective customers during that initial meeting regarding the work to be performed. If the police have set up a sting to arrest contractors, even licensed contractors as the police are apparently not making the distinction, anything a contractor says, even a general reference to a price, will likely result in an arrest. Of course, these charges can be defended in court, but the charge of offering to perform contracting services without a license is a serious charge with potentially very serious penalties, particularly for honest contractors who cannot afford to have such an arrest and/or conviction on his/her record.

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In a Florida mortgage fraud case, the police obtained an arrest warrant for a person they claimed had obtained fraudulent mortgage loans by using straw buyers and falsifying salary and employment information on loan documents. The police located the suspect driving near her home, stopped her vehicle and arrested her. When she was arrested in her vehicle, the police saw a bag in the backseat containing various documents. The police seized the bag of documents when they arrested her.

The suspect was ultimately convicted after her trial for mortgage fraud, grand theft and racketeering. Her criminal defense lawyer tried to have the documents found in the bag thrown out claiming the police illegally seized those documents. The criminal defense attorney claimed that the police did not have a search warrant for the bag of documents and had no reason to believe the bag contained evidence related to the case at the time the bag was seized. The criminal defense lawyer argued that unlike drugs or guns, nothing about a bag of papers suggests that it is evidence of criminal activity, and therefore the police do not have a right to take it without a search warrant.

However, the judge disagreed and allowed the state to use the documents as incriminating evidence to convict the defendant of the mortgage fraud and the related criminal charges. Under Florida law, when the police arrest a person in his/her vehicle, the police are permitted to search the vehicle if the suspect is within arm’s reach of items in the passenger compartment of the vehicle at the time of arrest or there is reason to believe the vehicle has evidence related to the crime(s) for which the suspect is being arrested. In this case, the judge found that latter standard to have a very low threshold. Basically, the judge found that since mortgage fraud is the kind of crime where one would expect there to be physical evidence, perhaps in a vehicle, the police were authorized to assume the bag they seized might have contained evidence of the related crimes. As a result, the police were justified in seizing the bag.

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In federal criminal cases charging a defendant with fraud relating to the operation of a business, a common defense is asserted that the defendant relied upon the advice of a professional or other advisor, such as an accountant, and had the right to assume his/her conduct was legal. In a federal criminal trial where the defendant is charged with fraud or a related crime and the defense is a good faith reliance upon such advice, the judge should normally allow the defendant to assert such defense and should normally instruct the jury that such good faith reliance upon an advisor is a valid defense if supported by the facts.

In criminal fraud cases in federal court, the government normally must prove that the defendant intended to defraud the victim. In other words, the government must prove beyond a reasonable doubt that the defendant’s purpose in performing the acts that constitute the fraud crime was to defraud another person out of services, money and/or other property. As a result, a logical defense to criminal fraud would be that the defendant had no ill-intent, but rather thought he/she was acting lawfully based upon the advice of an advisor. This is why good faith reliance upon the advice of a professional can be a valid defense in federal criminal fraud cases. Of course, whether the defendant acted with intent to defraud someone or was honestly and innocently relying upon an advisor is a matter for the jury to decide.

However, in order for the jury to properly understand and evaluate this defense when deliberating, the judge in the case must instruct the jury about this good faith reliance defense. If the judge rejects the federal criminal defense lawyer’s request to instruct the jury about the defendant’s good faith reliance upon an advisor defense, the jury cannot consider it when deciding the case. Under federal law, the judge does not have the authority to decide what the defendant’s defense is and instruct the jury accordingly. Likewise, the federal judge in a criminal case does not have the authority to decide that the defendant’s defense of good faith reliance upon an advisor is weak or lacking in credibility and therefore refuse to instruct the jury about the defense.

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The U.S. Department of Justice recently announced criminal charges against 94 people relating to Medicare and Medicaid fraud which is reportedly the largest health care fraud sting in U.S. history, according to an article on SFgate.com. The officials said the investigation and charges span seven states and involve more than $251 million in false Medicare and Medicaid claims.

Medicare or Medicaid fraud typically involves a doctor or other health care provider seeking reimbursement through the government program for medical supplies or medical treatment that was either unnecessary or never provided to a patient. In these recent cases, the subjects of the investigation are suspected of submitting false claims for physical and occupational therapy, home health care and other treatments. The federal government has recently discussed an increased focus on these cases and created a task force to investigate Medicare/Medicaid fraud in various states. Florida is reported to be one of the prime focuses of the task force. The government claims that health care fraud costs the country billions of dollars each year.