Articles Posted in Fraud

This is a criminal case where Defendant, a former Police Chief of Metro-North Commuter Railroad Company, has been indicted and charged with computer trespass in violation of Penal Law § 156.10(2), unauthorized use of a computer in violation of PL § 156.05), falsifying business records in the first degree in violation of PL § 175.10 and official misconduct in violation of PL § 195.00(1). A New York Criminal lawyer said that All charges arise from the alleged misuse of the New York State Police Information Network (NYSPIN), a computer system containing individual criminal histories. Defendant moves for an order seeking dismissal of the indictment on multiple grounds.

A public servant, to be guilty of official misconduct, must intend to obtain a benefit to himself. While PL § 10.00(17) defines a benefit as “including a gain or advantage to [another] person”, a fair reading of these words compels the conclusion that the benefit to another person must be at least indirectly of benefit to the accused, as, for example, a benefit to the accused’s family, to a friend or to the accused’s business., by using the words “and includes” rather than the word “or” limits “benefit” to a gain or advantage to the beneficiary.

There is nothing in the case law that contradicts this construction of PL § 195.00. In 1969, an upstate trial court recited the history of the statute and its predecessor provisions and held that the crime of official misconduct requires “[a] culpable motive which must be directly connected with the duty which the public servant violated and such motive must be of a venal nature”. It is a specific intent to obtain a benefit or to injure another person or deprive another person of a benefit”. A few courts have fleshed out the statutory definition of “benefit” in the context of bribery and bribe receiving under Penal Law Article 200.

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A man filed an appeal from a judgment convicting him of insurance fraud in the first degree, grand larceny in the third degree, offering a false instrument for filing in the first degree, bribing a witness, criminal solicitation in the fourth degree, conspiracy in the fifth degree and a violation of judiciary law.

The charges against the man were the conclusion of a lengthy investigation instituted after the committee discovered widespread improprieties with regard to the man’s law practice.

The investigation revealed that the man had a network of individuals who referred automobile accident victims to his law office. In return, the man will give $100 to $200 for each case they referred, depending upon the type of injury. After the man interviewed the clients, he would determine the type of medical treatment the client would allegedly receive so as to meet the threshold for recovery under the law.

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In this criminal action, defendants are the former chief executive officer (CEO) and chief financial officer (CFO) of a publicly-held diversified manufacturing company. After a nearly six-month trial, a jury convicted defendants of 12 counts of first degree grand larceny, eight counts of first degree falsifying business records, one count of fourth degree conspiracy and one Martin Act count of securities fraud. The principal charges concerned defendants’ theft of four multimillion-dollar “bonuses” between 1999 and 2001.

A Bronx County Criminal attorney said that defendants’ convictions arose primarily out of their abuse of two loan programs: the Key Employee Loan Program (KELP) and the relocation loan program. KELP allowed defendants and other executives to borrow funds to pay taxes due upon the vesting of restricted stock. The relocation loan program covered certain moving expenses incurred when the company transferred an employee to a new geographic area. Defendants did not, however, utilize these programs for permissible purposes. Instead, they incurred debts under them that were used to finance opulent lifestyles.

Under the Plan, defendants were entitled to a base salary regardless of the company’s performance, but had the potential to earn “performance awards,” or bonuses, by exceeding certain performance goals or “hurdles.” These awards took the form of cash payments and the vesting of restricted stock.

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Sometime in 1970, Congress enacted the Securities Investor Protection Act (SIPA), as amended, which authorized the formation of respondent corporation, a private nonprofit corporation, of which most broker-dealers registered under § 15(b) of the Securities Exchange Act of 1934, § 78o(b), are required to be members. Whenever respondent determines that a member has failed or is in danger of failing to meet its obligations to customers, and finds certain other statutory conditions satisfied, it may ask for a protective decree in federal district court. Once a court finds grounds for granting such a petition, it must appoint a trustee charged with liquidating the member’s business. After returning all securities registered in specific customers’ names, the trustee must pool securities not so registered together with cash found in customers’ accounts and divide this pool ratably to satisfy customers’ claims. When the extent the pool of customer property is inadequate, respondent must advance up to $500,000 per customer to the trustee for use in satisfying those claims. Bank fraud was not charged and neither was grand larceny or petit larceny .

On 24 July 1981, respondent sought a decree from the United States District Court for the Southern District of Florida to protect the customers of corporation-one, a Securities Corporation, a broker-dealer and a member of respondent. Three days later, it petitioned the United States District Court for the Central District of California, seeking to protect the customers of corporation-two, also a broker-dealer and a member. Each court issued the requested decree and appointed a trustee, who proceeded to liquidate the broker-dealer.

After two years, respondent and the two trustees brought a suit in the United States District Court for the Central District of California, accusing some 75 defendants of conspiracy in a fraudulent scheme leading to the demise of corporation-one and corporation-two. It was alleged that, insofar as they are relevant: from 1964 through July of 1981, the defendants manipulated the stock of six companies by making unduly optimistic statements about their prospects and by continually selling small numbers of shares to create the appearance of a liquid market; the broker-dealers bought substantial amounts of the stock with their own funds; the market’s perception of the fraud in July 1981 sent the stocks plummeting; and this decline caused the broker-dealers’ financial difficulties resulting in their eventual liquidation and respondent’s advance of nearly $13 million to cover their customers’ claims. The criminal complaint described petitioner’s participation in the scheme by alleging that he made false statements about the prospects of one of the six companies, corporation-three, of which he was an officer, director, and major shareholder; and that over an extended period he sold small amounts of stock in one of the other six companies, corporation-four, to simulate a liquid market; the conspirators were said to have violated the Securities Exchange Act of 1934, SEC Rules, and the mail and wire fraud statutes; and the complaint concluded that their acts amounted to a pattern of racketeering activity within the meaning of the RICO statute, so as to entitle the plaintiffs to recover treble damages. In other words, respondent alleged that petitioner conspired in a stock-manipulation scheme that disabled two broker-dealers from meeting obligations to customers, thus triggering respondent’s statutory duty to advance funds to reimburse the customers.

Complainant is a heart transplant nurse at a certain hospital who sued eight defendants for having allegedly violated the False Claims Act (“FCA”) by defrauding and conspiring to defraud the United States Treasury. She brought her suit under the qui tam provisions of the FCA which allow individual citizens to sue for fraud on behalf of the government and collect part of the government’s recovery. Pursuant to the procedures established in the qui tam provisions, Complainant filed a preliminary statement under seal which the United States reviewed at length. The government eventually decided not to intervene under 31 U.S.C. 3730(b)(4)(B), so complainant proceeded in the district court on her own.

After complainant filed her original complaint, the criminal defendants moved to dismiss under FED. R. CIV. P. 12(b)(6) for failure to state a claim. The district court denied each motion but requested additional briefing to address complainant’s standing under Article III of the United States Constitution. Complainant, the University of Texas Health Science Center at Houston, and the United States as intervenor for the limited purpose of defending the FCA’s constitutionality, briefed the standing issue. Complainant then filed a second amended complaint which was met with another round of motions to dismiss. Among the grounds for dismissal was an assertion by the University of Texas Health Science Center at Houston that the Eleventh Amendment bars complainant from suing it, because it is an arm of the state. The district court dismissed complainant’s claims on jurisdictional grounds, concluding that she had suffered no injury-in-fact and therefore lacked standing to sue. Because the court dismissed on standing grounds, it did not reach the arguments presented in the motions to dismiss, including the Eleventh Amendment defense. Assault was not charged.

On appeal, the defendants maintain that complainant lacks standing, and they assert two other constitutional arguments that they presented to the district court in their motions to dismiss: (1) that the qui tam provisions of the FCA violate the Constitution’s Appointments Clause and (2) that qui tam actions in which the government does not intervene violate the Take Care Clause and the constitutional doctrine of separation of powers. The United States continues its intervention for the limited purpose of defending the constitutionality of the qui tam provisions.

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