Justia Contracts Opinion SummariesArticles Posted in White Collar Crime
Aleynikov v. Goldman Sachs Grp., Inc
Aleynikov is a computer programmer who worked as a vice president at GSCo in 2007 through 2009. After accepting an employment offer from another company, Aleynikov copied source code developed at GSCo into computer files and transferred them out of GSCo. He was convicted of violations of the National Stolen Property Act, 18 U.S.C. 2314, and the Economic Espionage Act, 18 U.S.C. 1832. The Second Circuit reversed the conviction. He was then indicted by a New York grand jury and that case remains pending. Aleynikov filed a federal suit, seeking indemnification and advancement for his attorney’s fees from Goldman Sachs. He claims his right to indemnification and advancement under a portion of Goldman Sachs Group’s By-Laws that applies to non-corporate subsidiaries like GSCo, providing for indemnification and advancement to, among others, officers of GSCo. The district court granted summary judgment in Aleynikov’s favor on his claim for advancement but denied it on his claim for indemnification. The Third Circuit vacated with respect to advancement. The meaning of the term “officer" in GS Group’s By-Laws is ambiguous and the relevant extrinsic evidence raises genuine issues of material fact precluding summary judgment. The court otherwise affirmed.View "Aleynikov v. Goldman Sachs Grp., Inc" on Justia Law
United States v. Whiteagle
The Ho-Chunk Nation, a federally recognized Indian Tribe, operates casinos in Wisconsin and nets more than $200 million annually from its gambling operations. Cash Systems, one of three businesses involved in this case, engaged in issuing cash to casino customers via automated teller machines and kiosks, check-cashing, and credit- and debit-card advances. Whiteagle, a member of the Nation, held himself out as an insider and offered vendors an entrée into the tribe’s governance and gaming operations. Cash Systems engaged Whiteagle in 2002 as a confidential consultant. Cash Systems served as the Nation’s cash-access services vendor for the next six years, earning more than seven million dollars, while it paid Whiteagle just under two million dollars. Whiteagles’s “in” was his relationship with Pettibone, who had been serving in the Ho-Chunk legislature since 1995. Ultimately, Whiteagle, Pettibone, and another were charged with conspiracy (18 U.S.C. 371) to commit bribery in connection with the contracts with the Ho-Chunk Nation and substantive bribery (18 U.S.C. 666). Whiteagle was also charged with tax evasion and witness tampering. Pettibone pleaded guilty to corruptly accepting a car with the intent to be influenced in connection with a contract. Whiteagle admitted that he had solicited money and other things of value for Pettibone from three companies, but denied actually paying bribes to Pettibone and insisted that he and Pettibone had advocated for Whiteagle’s clients based on what they believed to be the genuine merits of those clients. Convicted on all counts, Whiteagle was sentenced, below-guidelines, to 120 months. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence on the bribery charges, the loss calculation, and admission of certain evidence.View "United States v. Whiteagle" on Justia Law
Centerpoint Energy Servs., Inc. v. WR Prop. Mgmt., LLC
The Halims own named WR Property Management. The company’s predecessor had contracted to buy natural gas from CES for the Halims’s 41 Chicago-area rental properties. CES delivered, but the company stopped paying and owed about $1.2 million when CES cut off service and filed suit. An Illinois court awarded $1.7 million, including interest and attorney fees. The company did not pay; the Halims had transferred all of its assets to WR. CES filed a diversity suit under the Illinois Fraudulent Transfer Act. The district court granted CES summary judgment and entered a final judgment for $2.7 million on fraudulent‐conveyance and successor‐liability claims. The Seventh Circuit affirmed, stating: “If the Halims are wise, they will start heeding the adage: if you’re in a hole, stop digging.” View "Centerpoint Energy Servs., Inc. v. WR Prop. Mgmt., LLC" on Justia Law
Venture Global Eng’g, LLC v. Satyam Computer Servs., Ltd.
Satyam approached the Trust about forming a joint venture to provide engineering services to the automotive industry. Satyam represented that it was an IT-services provider with a base of automotive customers, that it was publicly-traded, audited, and financially stable. The Trust formed VGE, a separate legal entity; in 2000, VGE and Satyam formed SVES under the laws of India; VGE contributed $735,000. VGE and Satyam signed agreements calling for binding arbitration. In 2005, Satyam initiated arbitration. VGE counterclaimed that Satyam had breached its obligations. The arbitrator rejected VGE’s counterclaims, found that Satyam never competed with SVES, and found an event of default entitling Satyam to purchase VGE’s shares in the joint venture for book value. Satyam filed an enforcement action. The district court ordered VGE to comply with the award. The Sixth Circuit affirmed. Following a 2007 contempt proceeding, VGE complied. In 2010, VGE and the Trust sued, alleging that, starting before the joint venture, Satyam engaged in a massive fraud scheme about its financial stability, and claiming civil violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961–1968. The district court dismissed, based on res judicata defense, and denied leave to amend. The Sixth Circuit reversed. The complaint adequately alleged that Satyam wrongfully concealed the factual predicate to claims, so the defense of claim preclusion does not apply. View "Venture Global Eng'g, LLC v. Satyam Computer Servs., Ltd." on Justia Law
United States v. Clark
Clark, the owner and president of an East St. Louis Illinois company, was charged with making false statements in violation of 18 U.S.C. 1001(a)(3). Clark’s company had entered into a hauling services subcontract with Gateway, general contractor on a federally funded highway project in St. Louis, Missouri. Employers must pay laborers working on certain federally-funded projects the “prevailing wage,” calculated by the Secretary of Labor based on wages earned by corresponding classes of workers employed on projects of similar character in a given area, and maintain payroll records demonstrating prevailing wage compliance, 40 U.S.C. 3142(b) The indictment charged that Clark submitted false payroll records and a false affidavit to Gateway, representing that his employees were paid $35 per hour, when they actually received $13-$14 per hour. The district court dismissed for improper venue, finding that when a false document is filed under a statute that makes the filing a condition precedent to federal jurisdiction, venue is proper only in the district where the document was filed for final agency action. The Seventh Circuit reversed. Although the effects of the alleged wrongdoing may be felt more strongly in Missouri than in Illinois, the Southern District of Illinois is a proper venue. View "United States v. Clark" on Justia Law
West Hills Farms, LLC v. ClassicStar Farms, Inc.
In 1990 Plummer, a recognized expert in horse-breeding and the tax consequences of related investments, created the Mare Lease Program to enable investors to participate in his horse-breeding business and take advantage of tax code provision classification of horse-breeding investments as farming expenses, with a five-year net operating loss carryback period instead of the typical two years, 26 U.S.C. 172(b)(1)(G). Plummer’s investors would lease a mare, which would be paired with a stallion, and investors could sell resulting foals, deducting the amount of the initial investment while realizing the gain from owning a thoroughbred foal. If they kept foals for at least two years, the sale qualified for the long-term capital gains tax rate, 26 U.S.C. 1231(b)(3)(A). Between 2001 and 2005, the Program generated more than $600 million. Law and accounting firms hired by defendants purportedly vetted the Program. Plummer and other defendants began funneling Program funds into an oil-and-gas lease scheme. It was later discovered that the Program’s assets were substantially overvalued or nonexistent. Investors sued under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962(c), also alleging fraud and breach of contract. The district court granted summary judgment and awarded $49.4 million with prejudgment interest of $15.6 million. The Sixth Circuit affirmed, stating that there was no genuine dispute over any material facts. View "West Hills Farms, LLC v. ClassicStar Farms, Inc." on Justia Law
SBRMCOA, LLC v. Bayside Resort Inc.
The Condominium Association’s declaration required Bayside to provide fresh water and wastewater treatment to the Association and made all of the water facilities common property of the Association. Bayside contracted with TSG to construct and operate a system to fulfill its obligations. TSG charged Bayside $0.02 per gallon. By 2005, Bayside owed millions of dollars to creditors including TSG and the Association. Bayside assigned its rights to TSG, permitting TSG to charge $0.05 per gallon. To secure the Association’s consent Bayside and TSG threatened to cease providing services even though it was not feasible to obtain those services elsewhere. The Association’s Board consented and signed a Water Supply Agreement, which provided that Bayside owned the water facilities and contained an arbitration clause. After not receiving payments under the WSA, TSG temporarily stopped producing potable water for the Association, which then filed suit, asserting criminal extortion under the Racketeer Influenced Corrupt Organizations Act; breach of obligations under the Declaration; and ownership of the water treatment systems. The district court ordered arbitration. The Third Circuit affirmed in part but vacated in part. The Association raised a bona fide question as to whether its Board had authority to enter into the WSA, a question that requires judicial determination. View "SBRMCOA, LLC v. Bayside Resort Inc." on Justia Law
United States v. Watkins
Watkins, an African-American, worked for the school district, overseeing security systems. Fultz supervised Watkins and, relying on Watkins’s advice, Fultz awarded Vision a $182,000 annual contract for service of security cameras. Vision’s president, Newsome, testified that Watkins called her and talked about a “finder’s fee.. Newsome went to Cleveland for a customer visit. She e-mailed Watkins and he replied: “Absolutely$.” Newsome believed that Watkins expected her to pay him at their meeting. Newsome notified Fultz. At the meeting, Watkins requested “an envelope.” After Fultz contacted police, the FBI recorded meetings at which Newsome gave Watkins $5,000 and $2,000. A white jury convicted on two counts of attempted extortion “under color of official right” (Hobbs Act, 18 U.S.C. 1951), and one count of bribery in a federally funded program, 18 U.S.C. 666(a)(1)(B). The court determined a total offense level of 22, applying a two-level enhancement for obstruction of justice, another two-level enhancement for bribes exceeding $5,000, and a four-level enhancement for high level of authority, plus an upward variance of 21 months under 18 U.S.C. 3553(a), and sentenced Watkins to six years’ incarceration. The Sixth Circuit affirmed, rejecting challenges to jury instructions, sufficiency of the evidence, the jury’s racial composition, and the reasonableness of the sentence.View "United States v. Watkins" on Justia Law
Go-Best Assets Ltd. v. Citizens Bank of MA
In 2000 Go-Best wired $5 million to an account entitled "Morris M. Goldings client account" at Citizens Bank, based on representations made by Morris M. Goldings, who was then a Massachusetts attorney. Goldings later admitted that the representations were false and that he had used the money to pay other debts. Go-Best filed suit against Citizens Bank, bringing claims of misrepresentation, conversion, aiding and abetting a fraud, aiding and abetting a breach of fiduciary duty, aiding and abetting a conversion, and negligence. Citizens Bank had no knowledge of Goldings's scheme to defraud Go-Best but failed to notify the Board of Bar Overseers of dishonored checks issued on the client account more than six months before Go-Best wired funds into that account. The trial court dismissed, but a divided Appeals Court reversed in part, vacating dismissal of claims of negligence and of aiding and abetting. The Massachusetts Supreme Court reinstated dismissal. Without actual knowledge, the bank's duty to notify the board of dishonored checks from trust accounts arose only from its contractual duty, not from any duty in tort, so the bank could not be liable to Go-Best for any negligence in fulfilling that duty. View "Go-Best Assets Ltd. v. Citizens Bank of MA" on Justia Law
United States v. Andrew
Andrews was designated as contractor for improvements to the sewage system, in a no-bid process involving kickbacks and bribery, having made numerous false statements in the bond application package. After the contract was terminated, he submitted a claim of $748,304, based on false statements and duplicate charges. Evidence indicated that Andrews was not capable of the project work and that the entire scheme was fraudulent. He was convicted of one count of conspiracy, 18 U.S.C. 371, four counts of wire fraud, 18 U.S.C. 1343, 1346, and 2, one count of program fraud, 18 U.S.C. 666(a)(1)(B) and 2, one count of making a false claim upon the Government of the Virgin Islands, 14 V.I.C. 843(4), and one count of inducing a conflict of interest, 3 V.I.C. 1102, 1103, and 1107. The Third Circuit affirmed the conviction, but remanded for resentencing. Errors in the indictment and jury instructions concerning honest services fraud did not affect substantial rights. Although the 151-month term of imprisonment was within the statutory maximum for Counts Two through Five, it exceeded the statutory maximum for Counts One and Six; it was not possible to determine whether the sentence was legal as to each count