A Trial Victory in a Federal White-Collar Case!

not-guilty-roadsig_450It’s a dreary Monday morning in D.C., but I saw this article on Law360 (subscription required, sorry) that brought a little cheer to the day.

Last Thursday, a jury in Fort Myers, Florida, acquitted the former division president of Health Management Associates, Inc. (HMA) of an obstruction of justice charge.

According to the superseding indictment (which is light on facts), Joshua Putter allegedly made a “false entry” in a letter to the CEO of a company called Carlisle Regional Medical Center. The supposed purpose of the false entry was to throw off federal investigators.

HMA is being investigated by the SEC, as well as DOJ and the Inspector General of the Department of Health and Human Services.

The jury did not take long to find Mr. Putter not guilty. The trial was two weeks long. The deliberations lasted just 90 minutes.

Most juries take that long to select a foreperson, get the exhibits and figure out what they want for lunch. There can’t have been much to the government’s case if the jury only needed 90 minutes to reach a verdict after hearing two weeks of evidence.

Perhaps the saddest part of the story is that Mr. Putter had left HMA at least two years before the superseding indictment. He then was the COO of Steward Health Care System in Boston from sometime in 2011 until June 2013, when he went on personal leave.

A local news story explained:

As he waited for trial, [Mr. Putter’s lawyer] said, Putter became an Orange Leaf Frozen Yogurt franchisee, opening a store in the South Florida city of Hollywood.

Mr. Putter has been under indictment for a year, essentially lost his high-powered job and had to open a yogurt store. I wonder if the prosecutors are even the slightest bit remorseful for bringing what appears to be an extremely weak case against him. Did they consider the havoc it would wreak on his life?

Congratulations to Mr. Putter’s lawyers, Christopher Brown and Lee Hollander! And, congratulations as well to Mr. Putter–who fought the good fight here.

P.S. Feel free to send me other federal court trial victories in white-collar cases. I’d be happy to post some good news here, rather than only about indictments, investigations and sentences. A little hope is a good thing for all of us.

 

Posted in Acquittal After Jury Trial, Health care fraud, Obstruction | Leave a comment

Don’t Mess With . . . the FDIC? A “Real Housewife” and Bank Executives Find Out the Hard Way

FDICYou may think of the Federal Deposit Insurance Corporation’s (FDIC) as the friendly folks who insure your money at the bank.

Or you may think of the FDIC as the regulator that deals with failed banks.

You probably do not think of the FDIC as an agency to fear.

The criminal prosecutions of Craig On and Michael Davis are a sobering reminder that the FDIC’s Office of the Inspector General (OIG) should not be dismissed out of hand. The FDIC’s OIG has been expanding its reach in recent years.

These days, your clients should be prepared for the very real possibility that a criminal prosecution may follow an FDIC investigation.

A few recent cases demonstrate this trend, including one against a “Real Housewife” of New Jersey.

Continue reading

Posted in Bank fraud, Conspiracy, OIG investigations, Uncategorized | Leave a comment

The First-Ever Prosecution for “Spoofing”

Definition: Spoof

Noun

  1. a mocking imitation of someone or something, usually light and good-humored; lampoon or parody; 2. a hoax; prank.

Verb

  1. to mock (something or someone) lightly and good-humoredly; kid; 4. to fool by a hoax; play a trick on, especially one intended to deceive; 5. to scoff at something lightly and good-humoredly; kid.

The Department of Justice has brought the first-ever indictment for spoofing. Contrary to the definitions above, spoofing is no joke.

Michael Coscia, former manager and owner of Panther Energy Trading LLC, has been indicted for spoofing and commodities fraud. The 12-count indictment alleges that Mr. Coscia used two custom-built trading programs to manipulate two futures markets in 2011.

His programs would supposedly fool other market participants into shifting prices in his favor.

For all that, Mr. Coscia now faces six counts of commodities fraud in violation of 18 U.S.C. § 1348 and six counts of “spoofing” in violation of 7 U.S.C. §§ 6c(a)(5)(C) and 13(a)(2).

Continue reading

Posted in Securities fraud | Leave a comment

How Much Cooperation Is Enough to Avoid Prison?

How much cooperation with the government does your client have to provide to avoid prison?

If portfolio manager Reema Shah is any example, the answer is…over a year.

On May 21, 2014, Ms. Shah pleaded guilty to conspiracy to commit securities fraud and insider trading. However, since 2009, Ms. Shah had been working as a government cooperator.

For about a year, she activley gathered information on co-workers and friends, and turned that information over to federal investigators as part of their investigation into SAC Capital Advisors LP and other targets.

In return, she was sentenced to probation.

Continue reading

Posted in Insider Trading, Securities fraud, Sentencing | Tagged | Leave a comment

A Look-Back Review Gone Wrong – SEC Charges Wells Fargo Compliance Consultant with Altering Records Related to Insider Trading

The SEC has charged Judy Wolf, a former compliance consultant for Wells Fargo Advisors, with falsifying records that were submitted to the SEC during the investigation of a registered Wells Fargo representative. Ms. Wolf allegedly falsified her internal investigation logs so she would appear to have been a more competent and thorough compliance investigator.

As a result, Ms. Wolf is now the subject of her own SEC investigation for aiding and abetting Wells Fargo’s securities violations.

Because Wells Fargo was a registered broker-dealer and investment advisor, Section 15(g) of the Exchange Act and Section 204A of the Advisors Act require it to have written policies and procedures that are reasonably designed to prevent the misuse of material nonpublic information.

Ms. Wolf was part of Wells Fargo’s efforts to comply with Section 15(g) and Section 204A. According to the SEC, she may have been part of the problem rather than part of the solution.

Continue reading

Posted in Insider Trading, Obstruction, SEC Investigation | Tagged | Leave a comment

When an FBI Agent is the Bad Guy

On September 30, 2014, Robert Lustyik entered a guilty plea in connection with alleged grand jury tampering and obstruction of justice. Mr. Lustyik has been charged with interfering with the investigation of his alleged business partner, Michael Taylor.

In return for this help, Mr. Taylor promised Mr. Lustyik a large sum of money and a stream of lucrative future business contracts. Before completing the alleged scheme, however, Mr. Lustyik was arrested. Mr. Lustyik pleaded guilty to an 11-count indictment charging conspiracy, honest services wire fraud, obstruction of a grand jury proceeding, and obstruction of an agency proceeding.

Sounds pretty hum-drum until you hear what Mr. Lustyik does for a living.

Continue reading

Posted in Obstruction, Plea Agreement | Leave a comment

When Criminal Law and the First Amendment Meet: Can Internal Investigation Reports Be Defamation?

At the end of an internal investigation, outside counsel frequently prepares a written report. That written report may be for the Board of Directors only or it may be passed along to the Department of Justice.

In the report, the company has every incentive to name names. It will label the supposed employee-wrongder as “rogue” or an “outlier” to the normally-excellent compliance culture.

But what if the company gets it wrong when it reports to the government? Can the employee being blamed sue the company for defamation based on statements in the report? I’ve handled a few defamation cases myself, but it’s rare to see criminal law and defamation in the same case.

A recent Texas case is addressing this issue. Depending on how it turns out, companies may need to think a lot more carefully before blaming someone.

Robert Writt, a former project manager for Shell International E&P, Inc. has sued the Texas-based oil giant for defamation based on a report that Shell submitted to the Department of Justice concerning Mr. Writt’s alleged involvement in a number of Foreign Corrupt Practice Act (FCPA) violations.

Continue reading

Posted in FCPA, internal investigation | Tagged , | Leave a comment

Betraying a Client’s Trust: Wilson Sonsini Employee and CEO of Investor Relations Firm Separately Accused of Insider Trading

The Department of Justice and the Securities and Exchange Commission are not specifically tasked with protecting client confidentiality of U.S. corporations. But the calculus changes when service providers use their client’s confidential information to profit from insider trading.

An information technology employee with Wilson Sonsini Goodrich & Rosati and the CEO of an investor relations firm were recently accused of doing just that. Stephen Gray and Dimitry Braverman face parallel criminal prosecutions and SEC lawsuits.

In short, they each had access to a wealth of confidential client information. The government alleges that each used this information to reap large profits from transactions in advance of merger and earnings announcements.

Mr. Gray has pleaded guilty to one count of securities fraud.

Continue reading

Posted in Insider Trading | Tagged | 1 Comment

Guns, Not Drugs—Two Recent Arms Export Control Act Prosecutions

If a lawyer at a cocktail party introduces himself to you as an “international trade lawyer,” would you think “oh, how boring”?

You shouldn’t.

There may be some less-than-exciting aspects of trade law (see, e.g., anti-dumping work) but this regulatory practice is increasingly attracting the interest of criminal authorities.

Practice tip: If you work in a big firm, make friends with the trade lawyers because some of their clients are going to need your white collar expertise.

Two recent prosecutions in New Jersey are good examples of these kinds of cases. Both involve the Arms Export Control Act, both are against contractors and both deal with supposedly fraudulent military contracts.

The government separately indicted Alper Calik and Hannah Robert for wire fraud and violations of the Arms Export Control Act.

Continue reading

Posted in Indictment, International Trade Violations | Tagged | Leave a comment

High Frequency Trading Can Be a High Risk Endeavor — Another Trade Secrets Prosecution

The latest entrant into the Cover-Up Is Worse Than the Crime Hall of Fame is Sahil “Sonny” Uppal, a 26 year old former employee of Citadel LLC. He pleaded guilty to one count of obstruction of justice for hiding his unauthorized sharing of proprietary information related to Citadel’s high-frequency trading practice.

Mr. Uppal worked at Citadel, a Chicago-based financial institution, as a quantitative analyst, writing code for Citadel’s equity trading platform. But Mr. Uppal apparently decided to do more than programming. Instead, he made unauthorized copies of Citadel’s confidential and proprietary information related to high frequency trading, and then covered it up.

Now, the former analyst faces some serious prison time. Continue reading

Posted in Obstruction, Trade Secrets | Tagged | Leave a comment