For example, computers allow people to extract other people's personal information. As a result, a crime like identity theft has become one of the fastest growing crimes in the United States - which is a reason why laws like the Computer Fraud and Abuse Act (CFAA) have been enacted.
]]> The intent of the CFAA is to reduce computer-related offenses. It imposes civil and criminal penalties for anyone who knowingly and wrongfully accesses a computer to cause harm. The act applies to access of any computer that is connected to the Internet.Common examples of causes of action under the CFAA include when:
For more about charges brought under the CFFA, please check back for our next post.
Source: Texas Lawyer, "Computer Fraud and Abuse Act 101," 12/19/11.
]]>Given how the number of prosecutions skyrocketed in 2011, it should be no surprise that federal authorities have now reported recovering over $4.1 billion after cracking down on fraudulent Medicaid and Medicare claims.
According to representatives from the Department of Justice and the Department of Health and Human Services, this recovery is up almost 50 percent from 2009. Not only are more individuals being prosecuted for health care fraud, but federal agencies are also being more proactive in their fraud monitoring efforts.
]]> Federal agents are being used to carefully screen potential Medicare providers before they are allowed into the system. The Centers for Medicare and Medicaid Services has also made it harder for health care providers to enroll in Medicare programs. These agencies hope that more stringent requirements and screening in the first place will be a long-term solution to Medicare fraud. It is believe that between $60 and $90 billion a year are paid out for phony Medicare claims.By increasing screening efforts - and paying out less claims initially - the government hopes that much of this fraud will be prevented. Additionally, the Department of Justice has noted that it is giving longer sentences to those committing health care fraud in hopes that it will deter future fraudulent actions. In 2011, the average prison sentence for fraud was 47 months - up from 42 months in 2010.
Source: Washington Post.com, "Feds beef up screening for Medicare providers; agency recovered $4.1 billion last year," 2/13/12.
]]>According to statistics gathered by Syracuse University, in fiscal year 2011 the federal government reported 1,235 health care fraud prosecutions. That number is up almost 69 percent from 2010, when only 731 fraud cases were filed.
]]> Of this record number, the Southern District of Florida saw the most prosecutions - accounting for about 1 in every 9 health care fraud prosecutions last year. New York also saw its fair share. When looking at the top ten judicial districts with the most health care fraud cases (relative to population), both New York's southern district and eastern district made the list. This simply goes to show that investigators and prosecutors in New York are seriously pursuing health care fraud.Health care fraud crimes were first tracked in the early 90s. In the 20 years which the government has been reporting health care fraud, there has been a significant increase in reported fraud cases - especially in the last year. In 1991, just over 100 cases were filed. That number steadily rose to 400 to 500 cases a year in the late 90s, and maintained an average of 500 to 700 cases a year throughout most of the first decade of 2000.
Please check back for our next blog post to read more about the continued push against health care fraud in the nation last year.
Source: Syracuse.edu, "Record Number of Federal Criminal Health Care Fraud Prosecutions Filed in FY 2011," 12/14/11.
]]>In 2010, the president of a New York-based financial real estate company was charged in a $100 million mortgage-fraud scheme. Using the company as a front for helping buyers who were in financial troubles with their homes, the employees actually lined up straw buyers to purchase the properties from the financially troubled sellers. Using inflated property appraisals and fake loan deals, banks issued mortgages for the properties. But instead of paying the sellers, the company pocketed the money. The end result: banks lost millions, straw buyers saw their credit destroyed and the sellers were foreclosed upon.
Twenty-seven people involved in the scheme pleaded guilty or were convicted. Several of those, as part of plea deals, cooperated with the prosecution and testified against the 40-year-old Long Island man. He was convicted and sentenced to serve 25 years in prison, with the possibility of parole after eight years, four months.
]]> Last fall, the former financial president decided to seek revenge against one of the witnesses that testified against him. He hired a hit man and asked that the murder be made to look like gang attack. He provided very specific instructions on how the hit could be carried out. Little did he realize that the hit man was an undercover agent.After his murder-for-hire plot was uncovered, he pleaded guilty to conspiracy to commit murder. He was sentenced earlier this week to an additional eight to 16 years in jail.
Source: CBS News.com, "Convicted NY fraudster sentenced in hit plot," 2/6/12.
]]>In 2004, the then-59 year-old woman started working in accounts payable for St. Patrick's Cathedral in New York. She was known by her co-workers as a hardworker with a dedication to public service. According to neighbors, she lived a quiet life in an apartment in the Bronx.
In her role, she wrote hundreds of checks to cover expenses like utility bills and office supplies. Over the course of seven years she wrote over 450 checks that were made out to one of her children. After the checks were printed she would change the records so that it appeared that the check had been made out to one of the church's vendors.
]]> Prosecutors from New York Attorney General's Office discovered that despite living in a modest apartment, the woman had a few expensive spending habits, including spending thousands of dollars collecting dolls, Bloomingdale's furniture, and Brooks Brothers clothing.The 67-year-old woman has been charged with first-degree grand larceny and falsifying business records. She could face up to 25 years in prison if convicted of grand larceny.
This is not the first time she has faced larceny charges. In 1986, she was arrested on multiple counts of criminal forgery and grand larceny. She pleaded guilty to a misdemeanor and received probation. Thirteen years later, in 1999, she was arrested again and charged with stealing more than $40,000 from the staffing agency in which she worked as a payroll manager. At the time she pleaded guilty to grand larceny in the third degree and received five years of probation. She was still on probation when she started working for the Archdiocese.
Source: New York Times, "In Million-Dollar Theft Case, Church Worker With a Secret Past," 1/30/12.
]]>As previously reported on this blog, over 20 people been arrested in conjunction with the SAT cheating probe in Long Island. The probe began when a faculty member at a New York high school heard rumors that students were paying someone else to take the SAT for them. So far, those arrested have included a number of the alleged test-takers, as well as students who paid them for their services. They have been charged with several felonies, including a scheme to defraud, falsifying business records and criminal impersonation.
]]> In an effort to curb similar future instances of cheating, New York Senator Kenneth LaValle has proposed a bill that would make it a felony to facilitate education testing fraud or to scheme to create education testing fraud. The main target of this action would be the person who is being paid for test-taking services.Also under the bill, creating forgeries of an education test would be a misdemeanor.
To help curb testing fraud, the bill would require test takers to provide more stringent photo identification, as well as other ways to prove that the test taker is the actual person who signed up for the exam. Possibilities such as fingerprinting and retinal scans are proposed in the bill.
State senator LaValle said that New York should lead the nation in preventing "cheating-for-pay" scandals. "As they say, as New York goes, so does the country," he said.
Source: Washington Post, "NY bill would make crimes out of SAT test cheating; hearings continue in Long Island scandal," 1/24/12.
]]>According to federal authorities in the U.S. Attorney's Office in Manhattan, the three bankers worked as client advisors at the Zurich branch of what is being termed as "Swiss Bank A." The three client advisors have been accused of working with U.S. taxpayers to conceal taxable U.S. income from the federal Internal Revenue Services (IRS) by hiding the existence of the Swiss bank accounts. It is believed that from 2005 to 2010, the three bankers helped more than 100 clients hide assets.
]]> All three bankers live in Switzerland, and it is unclear whether they might be extradited to New York. Each faces up to five years in prison for their role in the tax fraud scheme.In the last few years, Swiss banks have come under fire of federal authorities for their longstanding process of providing secrecy for banking clients. The tax fraud probe of financial giant UBS in 2009 led to a deal between authorities in the United States and Switzerland: UBS agreed to pay $780 million in fines and restitution, as well as disclose the identity of U.S. customers - despite Switzerland's historically strict banking secrecy laws.
Source: CNN Money.com, "Swiss bankers charged in $1.2 billion tax fraud," 1/3/12.
]]>Last year, New York State Inspector General Ellen Biben promised to probe into the abuse of business credit cards within state agencies: "Many employees are entrusted with state-issued credit cards to assist with their job-related duties and responsibilities, and not their personal expenses. New Yorkers rightfully expect that government employees do their jobs with integrity, and my office will continue to vigorously root out those who violate that trust."
The arrests of three New York state workers a few weeks ago shows that the Inspector General was has followed through last year's promise.
]]> Two state employees from the New York State Department of Health and one from the Office for People with Developmental Disabilities were arrested three weeks ago on charges relating to larceny and misconduct. All were believed to have used their government business credit cards for personal purchases.According to a statement issued by the inspector general's office, a 42-year-old secretary in the health department used her business credit card to pay for housing expenses and a rental car. She has been charged with felony-level larceny and a misdemeanor count of official misconduct. The second employee, a 55-year-old Schenectady woman who used to work as a secretary in the health department, used her business-issued card to pay several bar tabs as well as a for a personal storage unit. She was charged with four misdemeanor counts of larceny and one count of official misconduct. Both had been issued government cards to purchase office supplies and help book travel arrangements for department officials.
The third individual, a 29-year-old woman who had been an aide with the state disability agency, was believed to have used her card to purchase gas and a gift card. She had been issued a business card to buy equipment and supplies for the residential facility in which she worked as an aide. She has been charged with two misdemeanor counts of larceny.
Further action is pending in each of the employees' cases.
Source: Albany Times Union, "IG: Workers misused state-issued credit cards," 12/28/11.
]]>According to documents filed in federal court, a stock analyst who used to work at computer giant Dell kept in close contact with his former colleagues, including one high-level executive, and often used inside information about the company's financial results in trading stocks. In addition to making these trades himself, the analyst also shared the illegal tips with six others in the industry. As a result, federal prosecutors allege that illegal trading occurred across the country, with several fund and trust managers located in California, Connecticut and New York.
]]> Altogether, federal investigators believe that the seven investment professionals and their companies managed to make over $63 million off of the insider information.Last Wednesday, the seven were charged in a federal district in Manhattan with the crime of trading on illegal stock tips. The former Dell employee has pleaded guilty to the charges and, according to the New York Times, is cooperating with the government.
These white collar criminal charges are the latest in a federal sting targeting insider trading. In the last few years, as part of "Operation Perfect Hedge" federal agencies have taken a tough stance on insider trading, bringing charges in dozens of cases. This operation has led to more than 60 guilty pleas or convictions.
The SEC has also filed a civil lawsuit against the seven defendants.
Source: New York Times, "U.S. Charges 7 for Insider Trading of Dell Stock," 1/18/12.
]]>It is interesting to note that not all the cases were slam-dunks for the prosecution.
In fact, in at least two instances, there are clear examples where overzealous prosecutors and the government didn't always follow the rules. While the facts of cases that often make the news may be humorous, it is easy to forget real people were involved - some of whom may have been wrongly accused or who may have unknowingly been the victim of prosecutorial or governmental misconduct.
]]> In a case involving a California manufacturing company - in which prosecutors relied on the Foreign Corrupt Practices Act - executives were chared with paying over $5 million in bribes to Mexican government officials. The president and financial officer of the company were found guilty of the crime, but the decision was ultimately thrown out because of U.S. government misconduct during the investigation.In another case, prosecutors sought 24 years in prison for a man accused of insider trading. Instead, the man was sentenced to 11 years and tens of millions in fines and restitution. This was the longest sentence ever received for insider trading in the U.S. While many defense experts believe the sentence was excessive, prosecutors said they hoped it would send a message of deterrence for securities fraud.
These are only a few of the headlines that graced the pages of American newspapers during the past year. But rest assured that while 2011 is behind us, prosecutors will be hunting for instances of white-collar crime in the coming year.
It is important to remember that business people and business entities are still considered innocent until proven guilty - and under the American justice system, those charged with so-called white-collar crimes have the right to legal representation, the right to mount a defense and the right to have their day in court.
Source: Forbes.com, "The 2011 White Collar Crime Awards," 12/30/2011.
]]>With so much coverage of white-collar crime in the news, it can be easy to miss some of the headlines. Forbes magazine recently published an article highlighting some of the more notable white-collar crimes of 2011.
]]> One of the more memorable criminal prosecutions of 2011 involved former presidential candidate John Edwards. Edwards was accused of diverting $1 million in campaign funds during his bid for president to hide an affair. The trial against Edwards for the misappropriation of the funds was supposed to start this month (January 2012), but may be rescheduled due to his current health issues.In examining a number of white-collar cases this past year, Forbes noted that several judges rejected a few outrageously "severe" sentencing requests made by the Department of Justice in 2011. In one such case, the DOJ sought 22 years for a man who traded Disney on Ice tickets for political favors. The judge found the proposed sentence to be excessive in light of the alleged criminal activity and reduce the sentence to just 20 months. He also allowed the man to remain free while his lawyers appealed the case.
For more on notable white collar criminal cases in 2011, please check back for the continuation of this post later this week.
Source: Forbes.com, "The 2011 White Collar Crime Awards," 12/30/2011.
]]>As Mark Rockwell reports for Government Security News, six people have been indicted for Internet fraud involving more than $4 million dollars.
]]> Three of the accused are currently in custody in Nevada and California; the other three remain at-large overseas. All of the men are in their 20s and 30s and appear to be European nationals.As in many other Internet fraud cases, government prosecutors speak of Web "anonymity," behind which the accused are said to have hid to help perpetrate fraud. But it is this same anonymity that gives rise to the universal issue of search and seizures conducted by the police - to which every criminal defense lawyer turns when investigating the facts and defending his or her clients.
In Internet fraud cases, just as in fraud cases that do not involve the Internet, an unlawful search and seizure can be just as damaging to the prosecutor's case.
It is unclear, based on Rockwell's report, how the men came to be indicted; there were, however, many different law enforcement agencies involved in the investigation, ranging from Homeland Security Investigations (a division of ICE) to the U.S. Secret Service.
Source: Government Security News, "Six indicted in $4 million Internet vehicle sales scam," by Mark Rockwell, 12/30/11
]]>As we relate below, all this talk of fairness in sentences might soon mean more severe consequences for those who are accused of white collar crime.
]]> Joe Palazzolo, in his piece for the Wall Street Journal, quotes Lanny Breuer: "[A] defendant in one district may be sentenced to one or two years in prison for causing hundreds of millions of dollars in losses, while a defendant in another district is sentenced to 10 or 20 years in prison for causing much smaller losses."Breuer, as Palazzolo reports, is the same man who led the Justice Department's effort to reduce the sentencing disparity for offenses involving cocaine.
Palazzolo goes on to cite the percentages among three different federal districts in Chicago, New York and Houston; these are percentages that differ greatly from one to the other.
In that respect, Breuer seems to be calling for a new federal standard on white-collar crime - and one that would increase the consequences in terms of prison terms for those convicted of fraud and other white-collar crime involving huge dollar losses.
Source: The Wall Street Journal, "A White-Collar Sentencing Disparity?" by Joe Palazzolo, 11/15/11
]]>The SEC accused Citigroup of financial and securities fraud after it misleading customers by selling over $ 1 billion in mortgage-related securities without informing investors. As a par t of the case, the SEC proposed a settlement of $285 million with Citigroup.
Late last month, the Manhattan federal district court judge rejected the SEC's proposed settlement with Citigroup to and then went on to order both sides to prepare for trial in July.
]]> The SEC immediately filed a request with a federal court of appeals seeking a temporary stay. Basically, the federal securities agency asked the court to wait on enforcing the need for trial.But the federal appeals court did not know that the SEC had already filed a similar motion in federal district court, and that there was a possibility that the case might be dismissed.
In the Manhattan federal district judge's supplemental order, he claimed that the SEC's appellate filing was "materially misleading" because Citigroup had until January 3 to file the answer in the lawsuit, so the SEC jumped the gun. In the order, the federal judge said that the SEC should have known that Citigroup was planning on asking the case to be dismissed from all court proceedings.
The order also criticized the SEC's handling of a number of Wall Street cases - specifically the practice of settling cases without requiring the accused party to confirm or deny the charges.
Source: New York Times, "Judge Says S.E.C. Misled Two Courts in Citi Case," 12/30/11.
]]>According to the complaint, filed under the Racketeer Influenced and Corrupt Organizations Act (RICO), the defendants submitted fraudulent or misleading bills to the insurance company for medical supplies and equipment.
The complaint named the following parties to the fraud lawsuit:
This is the seventh time in the past 12 months that Allstate has filed charges alleging fraudulent insurance practices - a number of these suits have been filed in New York state. New York is undergoing an "insurance fraud crisis," according to the Insurance Information Institute. Every year, losses due to no-fault fraud in New York result in millions of dollars in increased insurance premiums for New Yorkers.
In fact, since 2003, Allstate has filed 34 lawsuits in New York against defendants believed to be taking advantage of New York's no-fault insurance laws. These 34 fraud lawsuits have sought over $135 million in damages, and resulted in a number of white collar criminal charges.
Source: Insurance Journal, "Allstate Files $6.3M Insurance Fraud Case Against 83 N.Y. Defendants," 12/22/11.
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