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Pietragallo's White Collar Criminal Defense Group

In today's environment, the government has never more aggressively regulated, investigated, pursued and prosecuted white collar crime. If you or your company becomes embroiled in any type of federal or state government investigation, you need experienced trial lawyers who have gone toe-to-toe with prosecutors and government agents.

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    Thursday
    Nov152012

    NACDL Conference: Panel Discusses Representation of VIP Clients

    The National Association of Criminal Defense Attorneys' seminar "Defending the White Collar Case: In & Out of Court" is being held today and tomorrow at Fordham Law School in New York, New York.  The first panel is discussing representing high-profile and celebrity clients. The panelists include Blair Berk, Rusty Hardin, Elliot Peters, and Gerald Lefcourt and was moderated by Judy Smith. Perhaps the best advice came from Blair Berk who encouraged counsel to resist the urge to walk up to the bank of microphones and answer the press' questions.

    Wednesday
    Nov142012

    FBI Agent and Business Associates Charged with Conspiracy, Fraud and Obstruction of Justice

    On October 18, 2012, a recently-retired FBI Special Agent, Robert G. Lustyik, Jr., and two associates, Michael O. Taylor and Johannes W. Thaler, were indicted on federal criminal charges alleging conspiracy, wire fraud, and obstruction of justice.  The indictment alleges that, beginning in 2011, the three defendants began a business relationship involving contracts for security services, electric power, and energy development in various locations throughout the Middle East and Africa. 

    However, in October 2010, a federal grand jury in Utah began investigating Taylor and his private security company, American International Security Corporation (“AISC”), related to a U.S. Department of Defense contract to provide training in Afghanistan to Afghan Special Forces for which AISC received $54 million.  The indictment alleges that Taylor and Thaler enlisted Lustyik to use his influence to impede the investigation of Taylor and AISC in exchange for cash payments of $200,000 and a share of future lucrative contracts.  The indictment also alleges that the three defendants communicated via e-mail “dead drops” to discuss the status of the federal investigation and Special Agent Lustyik’s progress in diverting investigative attention from Taylor and AISC.

    The complete indictment can be found here

    Wednesday
    Nov142012

    Pietragallo’s Raspanti and Kraus Discuss Proffers at 2012 PACDL White Collar Practice Conference

    Marc S. Raspanti and James W. Kraus presented at the PACDL’s 2012 White Collar Practice Seminar on November 9, 2012 at the Ritz Carlton Hotel in Philadelphia, PA.

    Mr. Kraus moderated the program while Mr. Raspanti participated on the panel, “Reflecting on Whitewater: Lessons in the Art of Negotiating Proffer Agreements through the Prism of a Presidential Crisis.”  The panel discussion explored the inner workings of one of the most extensive and notorious investigations in American history, including a review of the key characters, the competing legal, ethical and political interests, and the manner in which it all played out on the public stage. 

    Ken Gormley, Dean and Professor of Law at Duquesne University School of Law also participated on the panel.  His discussion of the historical events provided a foundation for discussion regarding a host of considerations in negotiating proffer and plea agreements, as reflected not only in the drama that surrounded the President and First Lady, but many of the other players, including their friends and business associates.  Dean Gormley chronicled these events in his critically acclaimed work The Death of American Virtue: Clinton vs. Starr.


    Tuesday
    Nov132012

    D.C. Circuit Rejects Restitution Order Under MVRA in Sentencing for Copyright Infringement

    On November 9, 2012, The U.S. Court of Appeals for the District of Columbia Circuit vacated a restitution order by the U.S. District Court for the District of Columbia in a copyright infringement case, finding that the government failed to offer evidence of the victim’s (Adobe Systems, Inc.) actual loss, instead offering evidence only of defendant’s gain.  U.S. v. Fair, No. 1:09-cr-00089-1, slip. op. (D.C. Cir., November 9, 2012). 

    Gregory Fair entered a plea of guilty to copyright infringement, 17 U.S. § 506(a), 18 U.S.C. § 2319, and mail fraud, 18 U.S.C. § 1341, acknowledging a criminal scheme that involved high-volume sales of pirated Adobe Systems’ software on eBay.  He admitted that he received approximately $1.4 million from his sales of pirated software on eBay.  The plea agreement stated, for purposes of calculating the offense levels, that “the infringement amount” was greater than $400,000, but less than $1 million.  As part of his agreement to plead guilty, Mr. Fair acknowledged that the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. §3663(A), mandated restitution.  The agreement, however,  did not specify an agreed-to amount.

    At sentencing, the government provided a spreadsheet that showed over 7,000 sales with total sales revenue of $767,465.99, which the government advanced as “a reasonable calculation of the restitution.”  Slip. op. 3.  Fair argued that restitution under the MVRA must take the form of “actual loss” to the victim, which cannot be equated to intended loss or gain by the defendant.  He further argued that the government had offered no proof of any actual loss by [the victim], Adobe Systems.  Id.  The district court sentenced Fair to 41 months imprisonment, three years supervised release and ordered him to pay Adobe Systems restitution of $743,098.99, an amount representing the total sales listed on the spreadsheet ($767,465.99), less the forfeited funds turned over to Adobe Systems by the Postal Inspection Service ($24,367.00).

    Mr. Fair challenged the restitution order on appeal, arguing that the government had failed to prove any actual loss to Adobe Systems, Inc.  In laying the groundwork for its decision, the D.C. Circuit indicated that circuit courts of appeals are in general agreement that the defendant’s gain is not an appropriate measure of the victim’s actual loss in MVRA calculation, citing U.S. v. Zangari, 677 F.3d 86, 92-93 (2nd Cir. 2006); U.S. v. Arlege, 553 F.3d 881, 889 (5th Cir. 2008); U.S. v. Chalupnik, 514 F.3d 748, 754 (8th Cir. 2008); United States v. Galloway, 509 F.3d 1246, 1253 (10th Cir. 2007); U.S. v. Kuo, 620 F.3d 1158, 1164-65 (9th Cir. 2010); U.S. v. Harvey, 532 F.3d 326, 341 (4th Cir. 2008); and U.S. v. Badaracco, 954 F.2d 928, 942-43 (3rd Cir. 1992).

    The Court then joined those Circuit Courts of Appeals in holding that in ordering restitution pursuant to the MVRA, the district court may not substitute a defendant’s ill-gotten gains for the victim’s actual, provable loss.  It added that victims of crime may achieve disgorgement of profits and ill-gotten gains through other statutory and civil recovery mechanisms.  Slip. op. 9.

    The Court found that in cases involving copyright infringement and fraudulent sales, the victim’s actual loss typically equates to the profit the victim lost on the sales that were diverted from the victim as a result of the defendant’s infringing sales.  Slip op. 10.  It added that the actual loss to the displaced (authentic) seller is the profit loss from the displaced sales – not the retail value of the goods that would have been sold.  It found that, in ordering Fair to pay restitution to Adobe Systems equivalent to his sales revenue, the district court abused its discretion because the government failed to present evidence from which the district court could either determine Adobe Systems’ actual loss or find that Fair’s gain was a reasonable measure of that loss.  In making its decision, the Court found that the government had blurred the line between the “infringement amount” calculated under the sentencing guidelines §2B5.3 in criminal copyright cases, which is derived by multiplying the retail value of the infringed or infringing items by the quantity of infringing items, and the restitution amount calculated under the MVRA, which must reflect the actual provable loss to the victim.

    In vacating the restitution order of the district court, the Court also rejected the government’s alternative argument that the matter be remanded to the District court so that it could present additional evidence regarding the loss to Adobe Systems, Inc.

    Monday
    Nov122012

    Middle District of Pennsylvania Includes Additional Government Disclosure Requirements in New Rule for Pre-Sentence Procedure

    The U.S. District Court for the Middle District of Pennsylvania has given notice that it has adopted a new local Rule of Criminal Procedure 32.1, effective December 1, 2012.  The new rule covers presentence procedure from the verdict or plea of guilty through the hearing on sentencing.

    The Rule specifically provides in 32.1(d) that the “government shall provide to the defendant’s counsel a copy of any documentary information provided to the probation officer to be considered in preparation of the presentence report at the same time it is provided to the probation officer.”  The Rule further provides that the defendant or defendant’s counsel may submit documentary information of their own to probation and counsel for the government.  This provision is notable for its codification of affirmative documentary disclosure requirements by the government in the pre-sentencing phase. 

    The U.S. District Court for the Western District of Pennsylvania has also recently proposed amendments to rules regarding sentencing, including changes to timing for sentencing proceedings, and procedures for administrative resolution of disputes regarding facts or factors material to sentencing contained in the presentence investigation report.  The proposed changes by the Western District do not include any requirements that the government provide defendant’s counsel a copy of any documentary evidence provided to or considered by the probation officer in the preparation of presentence report.  The Western District has solicited comments upon the proposed rule changes.  Anyone interested in providing comments to the changes to the Western District must do so by November 23, 2012 by either email (rvb@pawd.uscourt.gov) or by mail to Clerk of Court.

    Sunday
    Nov112012

    Indictment of Environmental Lab Operator a Sign of DOJ’s Willingness to Treat CWA Violations as Criminal Matters

    As industrial waste-water becomes a more significant issue, particularly in those states where hydraulic fracturing for natural gas recovery is prevalant, it is important to understand the potential criminal sanctions for violating the Clean Water Act (CWA).  DOJ’s willingness to proceed with criminal charges in such matters was recently demonstrated with the indictment of Tennie White, owner, operator and manager of Mississippi Environmental Analytical Laboratories, Inc.

    According to the indictment, which was filed in the U.S. District Court for the Southern District of Mississippi on November 9, 2012, White had been hired to perform laboratory testing of a manufacturer’s industrial process waste water samples.  Upon completion of the testing, White was to use those results to complete monthly Discharge Monitoring Reports (DMRs) for submission to the Mississippi Department of Environmental Quality (MDEQ).  According to the government, White created three DMRs that falsely represented that laboratory testing had been performed on samples when, in fact, such testing had not been done.  The indictment further alleges that White made false statements to a federal agent during a subsequent criminal investigation.

    Saturday
    Nov102012

    Wasson Capital, Ltd. President Pleads Guilty, Agrees to $2.3 Million in Restitution and Settles with SEC for Misleading Investors

    On November 9, 2012, Anand Sekaran, President and Director of Wasson Capital, Ltd. (“Wasson”) entered a plea of guilty to charges that he engaged in a $2.3 Million fraudulent scheme to defraud Wasson’s investors.  He settled civil charges with the SEC that same day.  In its announcement of the guilty plea, DOJ characterized Mr. Sekaran’s actions as constituting a “classic Ponzi scheme.”  In its news release regarding the civil charges, the SEC asserted that Sekaran concealed trading losses and diverted funds for personal use, including an allegation that he fabricated documents showing illusory profits after his trading strategy became unprofitable in 2008 and produced substantial losses to clients.

    According to the government, Sekaran originally formed Wasson in 1997 as an asset management firm that would invest client money primarily in the U.S. options market.  The government claims that as a result of both substantial losses he incurred and several redemption requests, Sekaran then engaged in a scheme to defraud investors, divert investor funds and perpetrate a “Ponzi” scheme through two methods from 2009 through June 2011.  The government explained that first Sekaran misrepresented to existing and potential investors, the firm’s investment value and past performance, the way investor funds were being used and the source of the funds distributed to investors who had requested redemptions.  The government alleged that Sekaran also distributed fraudulent statements to investors in order to forestall redemption requests, induce new investors to contribute to Wasson and induce existing investors to provide additional contributions.

    Sekaran entered a plea of guilty to one count of securities fraud and one count of mail fraud, agreeing to $2.3 million in restitution.  As part of his settlement with the SEC, Sekaran also consented to an Order by the SEC, barring him from the securities industry and from penny-stock investing.

    Friday
    Nov092012

    MoneyGram International Secures DPA, Forfeiting $100 Million, for Anti-Money Laundering and Wire Fraud Violations

    MoneyGram International, Inc. has entered into a Deferred Prosecution Agreement (DPA) with DOJ in which it admits to criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program.  As part of the agreement, a criminal information was filed in the U.S. District Court for the Middle District of Pennsylvania. The DPA calls for MoneyGram to forfeit $100 million.

    MoneyGram International, Inc., which is headquartered in Dallas, operates a global money business, providing electronic money transfers.  According to the government, MoneyGram processed thousands of transactions from MoneyGram agents known to be involved in an international scheme to defraud members of the public.  MoneyGram profited by collecting fees and other revenue from the fraudulent transactions.  Apparently, the scams included posing as victims, relatives in urgent need of money and falsely promising victims large cash prizes.  The government alleged that in each of the cases, the perpetrators required the victims to send them funds through MoneyGram’s money transfer system.  MoneyGram acknowledged that, despite the complaints of thousands of victims, it failed to terminate the agents involved in the scams.

    The government further alleged that MoneyGram’s involvement in the fraud scheme resulted from a failure to meet its Anti-Money Laundering (AML) obligations under the Bank Secrecy Act (BSA), 31 U.S.C. §§ 5311 et seq., including failure to implement policies governing the termination of agents involved in fraud; failure to implement policies or procedures to file the required Suspicious Activity Reports (SARs); failure to conduct effective AML audits of its agents and outlets; failure to conduct adequate due diligence on prospective and existing MoneyGram agents; and failure to sufficiently resource and staff its AML program.  Most of the requirements noted above were either added to the BSA or strengthened as part of the USA Patriot Act of 2001.

    As part of the DPA, MoneyGram is also required for the next five years to retain a corporate monitor who will report regularly to DOJ.  The monitor will oversee MoneyGram’s implementation of procedures to accomplish its agreements to enhance compliance obligations and structural changes to prevent a repeat of the charged conduct.

    Thursday
    Nov012012

    Marc S. Raspanti and James W. Kraus to Present at the PACDL 2012 White Collar Practice Seminar

    Marc S. Raspanti, a named partner in the law firm of Pietragallo Gordon Alfano Bosick & Raspanti, LLP, and James W. Kraus, a senior partner at the firm, will be presenting at PACDL’s 2012 White Collar Practice Seminar on November 9, 2012 at the Ritz Carlton Hotel in Philadelphia, PA.

    Mr. Kraus will moderate while Mr. Raspanti will participate on the panel, “Reflecting on Whitewater: Lessons in the Art of Negotiating Proffer Agreements through the Prism of a Presidential Crisis.”  The panel discussion will explore the inner workings of one of the most extensive and notorious investigations in American history, including a review of the key characters, the competing legal, ethical and political interests, and the manner in which it all played out on the public stage. 

    Ken Gormley, Dean and Professor of Law at Duquesne University School of Law will also participate on the panel.  His discussion of these historical events will provide a foundation for discussion regarding a host of considerations in negotiating proffer and plea agreements, as reflected not only in the drama that surrounded the President and First Lady, but many of the other players, including their friends and business associates.  Dean Gormley chronicled these events in his critically acclaimed work The Death of American Virtue: Clinton vs. Starr.

    For more information on the program, or to register, please click here.

    Monday
    Oct292012

    Former Kellogg, Brown and Root Employee Pleads Guilty to Bribery Charge Related to Afghanistan Contract

    On October 24, 2012, Diyana Montes, a former employee of Kellogg, Brown and Root, pled guilty to a bribery charge related to a conspiracy to bill the U.S. Army for trucking services in Afghanistan.  In 2008, Ms. Montes worked for Kellogg, Brown and Root at Bagram Airfield in Afghanistan where she was responsible for coordinating transportation of U.S. military equipment and supplies throughout Afghanistan.  Her duties included reviewing and verifying the request for transportation before passing them on to other contracting personnel for payment. 

    The guilty plea stemmed from misconduct by Mr. Montes where she forwarded inaccurate invoices for payment with the knowledge that they were fraudulent.  For her role in the conspiracy, she received $35,000 wired to her bank account and $15,000 paid in cash to her in Afghanistan.