Articles Posted in White Collar Crime

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In 2003, the government awarded Laguna a contract for Worldwide Environmental Remediation and Construction (WERC). Under the contract, Laguna received 16 cost-reimbursable task orders to perform work in Iraq, and awarded subcontracts to several subcontractors. The physical work under the contract was completed by 2010. Laguna sought reimbursement of past costs, a portion of which the government refused to pay after an audit by the Defense Contract Audit Agency. Before the Armed Services Board of Contract Appeals, the government alleged that it was not liable because Laguna had committed a prior material breach by accepting subcontractor kickbacks (18 U.S.C. 371, 41 U.S.C. 53), excusing the government’s nonperformance. Three of Laguna’s officers were ultimately indicted for kickbacks. The Board granted the government summary judgment on that ground, The Federal Circuit affirmed. Laguna committed the first material breach by violating the contract’s Allowable Cost and Payment clause because its vouchers were improperly inflated to include the payment, Federal Acquisition Regulation 52.216-7. View "Laguna Constr. Co. v. Carter" on Justia Law

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From 1997-2001, Nacchio served as Qwest's CEO. Based on 2001 stock trades, Nacchio reported a net gain of $44,632,464.38 on his return and paid $17,974,832 in taxes. In 2007, Nacchio was convicted of 19 counts of insider trading, 15 U.S.C. 78j, 78ff. Following a remand, the court resentenced Nacchio to serve 70 months in prison, pay a 19 million dollar fine, and forfeit the net proceeds, $44,632,464.38. Nacchio settled a concurrent SEC action, agreeing to disgorge $44,632,464. Nacchio’s criminal forfeiture satisfied his disgorgement obligation. The Justice Department notified participants in private securities class action litigation or SEC civil litigation concerning Qwest stock that they were eligible to receive a remission from Nacchio’s forfeiture. Nacchio sought an income tax credit of $17,974,832 for taxes paid on his trading profits. The IRS argued that his forfeiture was a nondeductible penalty or fine and that he was estopped from seeking tax relief because of his conviction. The Claims Court held that Nacchio could deduct his forfeiture payment under Internal Revenue Code 165, but not under I.R.C. 162 and was not collaterally estopped from pursuing special relief under I.R.C. 1341. The Federal Circuit reversed as to section 165;Nacchio failed to establish that his forfeiture was not a “fine or similar penalty.” Because establishing deductibility under another section of the code is a prerequisite to pursuing relief under section 1341, Nacchio cannot pursue a deduction under that section. View "Nacchio v. United States" on Justia Law

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ABB designs, produces, and sells exhaust-gas turbochargers and turbocharger parts, primarily for use in large, ocean-going vessels and in power plants. In 2012, ABB filed suit, accusing TurboUSA, Inc., and TurboNed Service B.V. of infringing two of ABB’s turbocharger-related patents. Claiming that the infringement was willful, ABB alleged that its former employee had improperly obtained and transferred to TurboUSA confidential information relating to ABB parts embodying its patented inventions. After filing its original complaint, ABB received information that, it alleges, suggested that Hans Franken, who worked for ABB until 1986 and is TurboNed’s former owner and TurboUSA’s current indirect owner, and his son Willem, who is TurboUSA’s current president, collaborated in the covert misappropriation of ABB’s trade secrets concerning the design, manufacture, servicing, and pricing of ABB’s turbochargers and parts, and added claims of misappropriation of trade secrets under Fla. Stat. 688.001–688.009 and of civil conspiracy to misappropriate trade secrets. Before discovery, the district court dismissed for failure to state a claim. The Federal Circuit reversed, concluding that the court relied on judgments about the merits that go beyond what is authorized at the complaint stage. View "ABB Turbo Sys. AG v. TurboUSA, Inc." on Justia Law

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In 2009, the Securities and Exchange Commission indicted Stanford for operating a multi-billion dollar Ponzi scheme. The government seized most of his assets rendering him an indigent defendant. Court-appointed counsel obtained authorization for legal services under the Criminal Justice Act (CJA), 18 U.S.C. 3006A(e), and employed Marcum for forensic accounting and litigation support, with an estimated budget of $4.5 million. The district court approved the budget, but Marcum did not obtain the Fifth Circuit's approval, as required by the CJA. Marcum’s work far exceeded the budget. Marcum received payment for work performed in June- August 2011,then submitted vouchers for work performed in September-November totaling $845,588.48. The district court certified only the September and October vouchers. Marcum attempted to resign from the case. Chief Judge Jones of the Fifth Circuit issued a Service Provider Continuity and Payment Order, authorizing payment of $205,000 for the September and October vouchers and ordered Marcum to continue working because “[i]t would be neither feasible nor economical to obtain a replacement.” Under threat of contempt sanctions, Marcum continued to work through the end of trial and claims unpaid fees of $1.2 million. Marcum filed an emergency motion for reconsideration, an emergency application for a stay before the U.S. Supreme Court, an emergency motion for a stay or a petition for writ of mandamus before the Fifth Circuit, and a petition for mandamus to the Supreme Court. All were denied. Marcum sued the Court of Federal Claims, which dismissed the claim for lack of subject matter jurisdiction. The Federal Circuit affirmed. Because the CJA provides its own remedial scheme, Marcum cannot collaterally attack the Fifth Circuit’s determination of Marcum’s fee awards under the Tucker Act. View "Marcum LLP v. United States" on Justia Law

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Trek was the importer of record for 72 entries of men’s suits in 2004. Mercantile was the consignee. Shadadpuri is president and sole shareholder of Trek, and a 40% shareholder of Mercantile. Trek and Mercantile provided a number of fabric “assists” to manufacturers outside the U. S. An assist refers to “materials, components, parts, and similar items incorporated in the imported merchandise,” 19 U.S.C. 1401a(h)(1)(A)(i). Customs determined that the entry documentation failed to include the cost of the fabric assists in the price paid for the suits which lowered the amount of duty payable by Trek. Shadadpuri had previously failed to include assists in entry declarations when acting on behalf of a corporate importer. The Court of International Trade found Shadadpuri liable for gross negligence in connection with the entry of imported merchandise and imposed penalties under 19 U.S.C. 1592(c)(2). The Federal Circuit reversed the penalty assessment, holding that corporate officers of an “importer of record” are not directly liable for penalties. Shadadpuri is not liable, absent piercing Trek’s corporate veil to establish that Shadadpuri was the actual importer of record, as defined by statute, or establishing that Shadadpuri is liable for fraud or as an aider and abettor. View "United States v. Trek Leather, Inc." on Justia Law