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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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    Three Not a Crowd: Seventh Circuit Lets Victims Intervene to Protect Restitution Award

    Crime victims awarded restitution in a criminal case may intervene in a subsequent appeal to defend their award, the Seventh Circuit has ruled.

    But victims cannot intervene in the district court, said the court, in a decision authored by Judge Richard Posner.  That could be a “recipe for chaos,” Judge Posner opined in United States v. Laraneta, ---F.3d---, 2012 WL 5897610 (7th Cir. Nov. 14, 2012), citing the potential for victims to participate in plea negotiations and trials.

    By contrast, Judge Posner wrote, intervention at the appellate stage imposes relatively few burdens and allows those with an economic interest in the outcome to defend their awards.

    “The government,” Judge Posner noted, “has no financial stake in restitution to victims of crime.”

    In Laraneta, the defendant pleaded guilty to seven counts of violating federal child-pornography laws and was sentenced to 30 years in prison.  He was also ordered to pay more than $4 million as restitution to two women of whom he possessed pornographic images taken when they were girls. 

    On appeal, the defendant challenged both the prison term and the restitution award.  The government defended only the prison term.  But the Seventh Circuit permitted the women to intervene, and the court allowed the intervention over the government’s objection.

    The court acknowledged that the Federal Rules of Criminal Procedure, unlike their civil analogs, contain no provision allowing for intervention.  So instead the court relied on its inherent power to let parties intervene on appeal, citing its own precedent, as well as case law from the Third and Fifth Circuits.  The court cast its decision as one of expedience, noting that crime victims already have a statutory right to seek mandamus when restitution is denied. 

    Posner brushed aside a recent case from the Eleventh Circuit, United States v. Alcatel-Lucent France, SA, 688 F.3d 1301, 1306 (11th Cir. 2012), which held that a crime victim cannot appeal from a denial of restitution.  (Three other circuits—the District of Columbia, First and Tenth—all have ruled similarly since 2008).  The issue in Laraneta—intervention at the appellate level—was not before the Eleventh Circuit, Posner wrote. 

    Ultimately, the Seventh Circuit found errors in the restitution award and remanded for further proceedings.  But Laraneta still adds one more complication for defendants who believe the restitution awards imposed against them are excessive or unlawful.


    Court Approves MoneyGram DPA

    On Wednesday, Judge Christopher Conner of the Middle District of Pennsylvania approved the deferred prosecution agreement between federal prosecutors and MoneyGram International, Inc., a global payment services company based out of Dallas, Texas.  As part of the seventeen page agreement, which was previously discussed in a November 9th White-Collared post, MoneyGram agreed to forfeit $100 million to be used towards establishing a victim compensation fund.  To-date, MoneyGram has paid $65 million, with the remaining $35 million due in early February.  MoneyGram also expressly acknowledged its responsibility for the acts of its officers, directors, and employees, and agreed to retain an independent corporate compliance officer for the five years in which the agreement is in effect. 

    The complete deferred prosecution agreement can be found here.


    “Pill Mill” Doctor Charged with Causing Death

    On November 29, 2012, a federal grand jury charged Dr. Norman Werther, 73, who operated a physical therapy and rehabilitation practice in Willow Grove, PA, with distributing a controlled substance resulting in death.  This is the first such case brought in U.S. District court for the Eastern District of Pennsylvania.  The death charge was contained in a third superseding indictment that also added 9 new defendants.  According to the superseding indictment, Werther conspired with 6 drug traffickers to illegally distribute millions of dollars in prescription drugs, including oxycodone.  The death charge relates to 180 oxycodone pills illegally dispensed by Werther to an individual who died from an overdose.  Werther faces a mandatory 20 years and maximum sentence of life in prison if convicted of all charges.


    BP Temporarily Suspended From Winning New Contracts With the Federal Government

    The Environmental Protection Agency (“EPA”) has temporarily suspended BP from winning new contracts with the federal government.  The decision comes less than two weeks after BP pled guilty to criminal charges and agreed to pay a record $4.5 billion in fines and other fees for the April 2010 drilling disaster in the Gulf of Mexico as discussed in a White-Collared post on November 17th. According to an EPA News Release, the suspension is the result of BP’s “lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout, explosion, oil spill and response.” The Release stated that the suspension will remain in place until the company provides sufficient evidence that it meets “federal business standards.”

    In a statement released after the announcement, BP stressed that the suspension does not affect any existing contracts that the company has with the U.S. government.  The company further made clear that it expects the suspension to be lifted soon.  According to BP, it has been in regular communication with the EPA in an effort to establish its qualifications to conduct business with the government. The EPA has informed BP that “it is preparing a proposed administrative agreement that, if agreed upon, would effectively resolve and lift this temporary suspension.”


    Pietragallo's Joseph Mancano Presents at the Pennsylvania Institute of Certified Public Accountants (PICPA) Forensic and Litigation Services Conference

    On November 28, 2012, Joseph D. Mancano, Chair of the firm's White Collar Criminal Defense Practice Group, was a co-presenter with Louis Lappen, Assistant United States Attorney, E.D.P.A., at the Pennsylvania Institute of Certified Public Accountants (PICPA) Forensic and Litigation Services Conference.  The presentation was entitled “Opening Statements From Prosecutor and Defense – USA v. Joseph Connors”.  The presentation was part of a case study involving the federal government’s prosecution of Joseph Connors, who was charged with engineering a $35 million dollar bank fraud.  Connors who was the CFO of Kleinert’s , Inc., a manufacturer of children’s apparel, was charged with artificially inflating the fiscal condition of Kleinert’s on financial disclosure reports the company was required to submit to its lenders under various revolving credit facilities.  The government charged that Connors had created a rosy picture of his company’s fiscal condition in order to continue to obtain funds from the company’s banks.  Mr. Mancano presented the defense perspective of the case.


    Two More Stanford Executives Convicted in Fraud Scheme

    On November 19, 2012, two former accountants of R. Allen Stanford were convicted of federal charges in relation to a $7 billion Ponzi scheme.  The defendants, Gilbert T. Lopez and Mark J. Kuhrt, both testified in their own defense at trial claiming that they were tricked by Stanford and the chief financial officer into creating false financial statements that investors relied upon when evaluating the company.  The convictions followed a five-week jury trial in the U.S. District Court of the Southern District of Texas.  R. Allen Stanford was convicted in March 2012 of stealing over $2 billion of investor deposits to finance his lavish lifestyle.  Lopez and Kuhrt will be sentenced on February 14, 2013 by U.S. District Court Judge David Hittner.


    SEC Chair Schapiro to Step down

    In a written release by the SEC this morning, Chairman Mary Schapiro announced her resignation, indicating she will depart the Commission on December 14, 2012. 

    Chairman Schapiro was appointed by President Obama at the beginning of his first term, taking over the reigns of the Commission at a low point in its history.  Prior to Schapiro's appointment, the SEC had sustained significant criticism for being impotent both in the run-up to and during the financial crisis of 2008.  It's most publicly embarrassing legacy was the failure to discover Bernard Madoff's multi-billion dollar Ponzi scheme, despite receiving specific tips regarding the scheme for several years prior to Madoff  turning himself in at the end of 2008.

    Chairman Schapiro led the Commission through a period of significant change, including a marked increase in enforcement actions, investment in the upgrading of the SEC's market intelligence capabilities, and implementation of rules for the SEC Whistleblower Program as mandated by Dodd-Frank.  According to the release announcing Schapiro's resignation, "In each of the past two years, the agency has brought more enforcement actions than ever before, including 735 enforcement actions in fiscal year 2011 and 734 actions in FY 2012."

    According to several news outlets, the favorite to replace Chairman Schapiro is Mary J. Miller, currently serving as an under secretary in the Treasury Department.  Miller was reported to have played a significant role in support of Secretary Geithner in the debt ceiling debates in 2011.

    A dark-horse candidate is Neil Barofsky, the former special inspector general for the Troubled Assets Relief Program (TARP), and a former federal prosecutor.  He ruffled some feathers with his outspoken criticism of Secretary Geithner and others regarding how TARP was executed.   He detailed many of these concerns in his book, Bailout:  An inside Account of How Washington Abandoned Mainstreet While Rescuing Wall Street.  It is not believed that anyone within the administration has floated Barofsky's name as a candidate, though a strong argument in his favor was made by Professor Simon Johnson in the Economix Blog of the New York Times, on November 22.  Here is a link to his post:

    The link to the entire release announcing Chairman Schapiro's resignation is here.


    Forensic Analysis of Computers is Key: Another Lesson Learned from the Casey Anthony Prosecution

    On Sunday, November 25, 2012, more than 16 months after Casey Anthony was acquitted of murdering her two year old daughter, Caylee, the Orange County Sheriff’s Department has acknowledged a glaring error in the investigation.  Investigators admit that they missed an Internet search performed on the Anthony family computer on the day Caylee was last seen alive: June 16, 2008.  Who performed the search is unclear, but the content is startling.  Someone used the computer’s Mozilla Firefox web browser to search for “fool-proof suffcation [sic].”  Investigators only analyzed the computer’s Microsoft Internet Explorer application for online searches prior to trial and overlooked the Mozilla application, which was often used by Casey Anthony.

    Prosecutor Jeff Ashton told Orlando television station WKMG that, “it's just a shame we didn't have it. This certainly would have put the accidental death claim in serious question."  The defense team knew about the search prior to trial, and attorney Jose Baez theorized that George Anthony, Casey’s father, conducted the Internet search in a suicidal state following Caylee’s accidental death.

    The Orange County Sheriff’s Department has allegedly corrected their procedures and now works with the FBI and/or the Florida Department of Law Enforcement on forensic analysis of computers.  In the technologically driven world in which we live, and in the growing world of E-discovery in which we practice, the importance of a full and complete forensic analysis of electronic information is essential.  Although this can be a very expensive process for the defense, it is of paramount importance in representing a client’s interests.

    For more information on the Casey Anthony case, visit the Associated Press or


    Revisions to Federal Sentencing Guidelines for Securities Fraud and Insider Trading Cases

    The U.S. Sentencing Commission recently announced revisions to portions of the federal sentencing guidelines manual related to securities fraud, mortgage fraud, and insider trading cases.  These amendments, which became effective on November 1, 2012, were made in response to two directives to the U.S. Sentencing Commission from within the Dodd–Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203.

    Section 2B1.1, titled “Theft, Property Destruction, and Fraud”, was revised to create special rules for determining loss in two scenarios: (1) securities fraud cases involving fraudulent inflation or deflation of the value of a publicly trade security, and (2) mortgage fraud cases in which the underlying collateral has not been disposed of at the time of sentencing.  The Sentencing Commission also revised Section 2B1.4, titled “Insider Trading”, to provide a minimum offense level of 14 where the underlying offense involved an organized scheme to engage in insider trading.     

    The U.S. Sentencing Commission published a comprehensive summary which outlines the above changes and other changes effective on November 1, 2012.


    BP Agrees to Plead Guilty and Record Criminal Fine, 3 Individuals Face Indictment in Deepwater Horizon Case

    Oil giant BP has accepted criminal responsibility for the largest offshore oil spill in the nation’s history. On November 15, 2012, BP agreed to plead guilty to 14 criminal charges and to pay a record $4.5 billion in fines and other payments. The settlement comes over two years after the Deepwater Horizon rig explosion, which killed 11 workers and caused a massive oil spill.

    The 14-count Information, filed by the Department of Justice in the U.S. District Court in the Eastern District of Louisiana, charges BP with 11 counts of felony manslaughter related to the workers’ deaths, one count of felony obstruction for misleading Congress about the rate at which oil was spilling from the well, and violations of the Clean Water and Migratory Bird Treaty Acts.  BP agreed to plead guilty to all 14 charges. BP Chief Executive Bob Dudley said in a statement: “We apologize for our role in the accident. As today’s resolution with the U.S. government further reflects, we have accepted responsibility for our actions.”

    As part of its guilty plea, BP agreed to pay $4 billion in criminal fines and penalties including a $1.26 billion criminal fine, the largest single criminal penalty in U.S. history, $2.39 billion to the National Fish and Wildlife Foundation for cleanup initiatives, and $350 million to the National Academy of Sciences.   BP also reached a $525 million agreement with the Securities and Exchange Commission to settle civil charges that it misled investors about the flow rate of oil from the well.

    In addition to resolving the charges against BP, the government indicted three individual BP employees.  The two Well Site Leaders stationed on the Deepwater Horizon were charged with 23 criminal counts including manslaughter. Additionally, BP’s former vice president of exploration for the Gulf of Mexico was charged with obstruction of Congress and making false statements to Congress regarding the rate at which oil was spilling from the well.

    According to Attorney General Eric H. Holder Jr., the settlement is “unprecedented, both with regard to the amounts of money, the fact that a company has been criminally charged and that individuals have been criminally charged as well.”

    The settlement comes on the heels of a massive, and on-going, clean-up effort by BP. To date, BP has paid $14 billion for direct cleanup efforts, $1 billion for early restoration projects, and more than $9 billion on civil payouts to individuals, businesses and government bodies. Another $7.8 billion settlement to resolve private plaintiffs’ claims for economic loss and property damage is pending approval. 

    Despite the settlement and indictments, Holder insisted that the criminal investigation “remains ongoing – and we’ll continue to follow all credible leads and pursue any charges that are warranted.”  Moreover, the settlement does not resolve civil litigation brought by the federal government and U.S. coastal states under the Clean Water Act.  If found to have behaved in a “grossly negligent” manner, BP could be held liable for as much as $21 billion under the Clean Water Act.  A federal civil trial is scheduled to being in February 2013.

    The complete Information can be found here.

    The complete Guilty Plea can be found here.