Industry: Financial Institution Fraud
On July 19, 2017, in United States v. Allen, et al. (16-cr-98) (Cabranes, Pooler, Lynch), the Second Circuit issued a decision reversing the convictions of defendants Anthony Allen and Anthony Conti for wire fraud and conspiracy to commit wire fraud and bank fraud. This was the first federal criminal appeal in connection with the London Interbank Offered Rated (“LIBOR”) prosecutions, which involved allegations that various individuals and banks manipulated the LIBOR. The LIBOR is a benchmark interest rate intended to reflect the available rates at which banks borrow money from other banks; the LIBOR is incorporated into the terms of financial transactions worldwide. We provided a brief summary of the opinion a few hours after the decision was rendered; here is our more detailed summary.
In a decision that will provide reassurance both to prosecutors and to the institutions with whom they enter into deferred prosecution agreements (“DPAs”), the Second Circuit (Katzmann, Lynch, Pooler (concurring)) held in United States v. HSBC Bank USA, N.A., No. 16-308(L), that the periodic reports submitted by an independent monitor responsible for evaluating compliance with a DPA are not “judicial documents” to which the public enjoys a First Amendment right of access. To reach its holding, the Court was required to address foundational separation-of-powers questions regarding a court’s role in approving and supervising the implementation of a DPA. The decision, written by Chief Judge Katzmann, will discourage courts from second-guessing decisions made by the executive branch in the legitimate exercise of its prosecutorial discretion. Along with the Second Circuit’s decision in SEC v. Citigroup Global Markets, Inc., 752 F.3d 285 (2d Cir. 2014), which held that a district court reviewing a proposed SEC consent decree may only reject it under limited circumstances, last week’s decision makes clear that the Second Circuit envisions that district courts will not play a significant role in assessing the fairness of the government’s settlements with financial and other institutions.
In United States v. Bodouva, 16-3937 (March 22, 2017) (Katzmann, C.J., Pooler and Lynch, J.), the Court held in a per curiam order that a defendant convicted of embezzlement must forfeit the full amount of her illicit gains to the government even after paying restitution to victims. The ostensibly “duplicative” financial penalty entered against the defendant was not only permissible, but in fact required by statute. The district court thus appropriately ruled at sentencing that it lacked discretion to modify the forfeiture amount. With this decision, the Second Circuit joined several other circuits in holding that restitution and forfeiture serve distinct purposes and, absent clear statutory authority to the contrary, may not offset each other.
Court Affirms Conviction In Case Involving $126 Million Loan For Shopping Mall Transaction, Rejecting Argument That Sentence Should Be Lowered Because Of The Financial Crisis
In a summary order on March 8, 2017, the Second Circuit (Katzmann, C.J. and Pooler and Lynch, J.) affirmed the conviction and sentence for wire fraud in United States v. Frenkel. The case attracted some public attention because Frenkel’s co-conspirator, Mark Stern, was a cooperating witness in a number of public corruption cases brought by the U.S. Attorney for the Southern District of New York. The underlying facts involved Frenkel’s fraudulent inducement of Citigroup to lend $126 million to finance the purchase of shopping malls. Although the decision has no precedential value, it presented four interesting issues.
In United States v. Tagliaferri, 15-536 (May 4, 2016) (Leval, Pooler, Wesley), the Court issued a per curiam order affirming Defendant’s conviction for violations of the Investment Advisors Act of 1940, 15 U.S.C. § 80b-6 (the “1940 Act”), entered by the United States District Court for the Southern District of New York (Abrams, J.). In the underlying appeal, the Defendant raised several challenges to his conviction by a jury for violations of the 1940 Act, as well as securities fraud, wire fraud, and violations of the Travel Act.
Defining the Terms: What Constitutes a “Federally Insured Financial Institution” Under 18 U.S.C. § 1344 or a “Bank” Under 18 U.S.C. § 1014?
In United States v. Bouchard, 14-4156, the Court (Parker, J., Lynch, J., and Lohier, J.) reversed the conviction of defendant Michael Bouchard after finding that the Government’s evidence only showed that Bouchard had made false statements in order to defraud BNC Mortgage (“BNC”), a mortgage lender that did not fall within the Title 18 definition of a “federally insured financial institution” or “bank” as would be required by statute for a conviction.
Second Circuit Demonstrates the Difficulties in Withdrawing a Guilty Plea and Challenging a Below-Guidelines Sentence
In United States v. Rivernider, 13-4865, the Court (Livingston, J., Lynch, J. and Rakoff, D.J., sitting by designation) affirmed the judgment entered by the United States District Court for the District of Connecticut (Chatigny, J.) against two defendants, Robert Rivernider and Robert Ponte. The defendants pled guilty and were sentenced for multiple counts of wire fraud, conspiracy to commit wire fraud, and tax evasion stemming from a Ponzi scheme and real estate scheme the two ran together.