Category Archives: White collar crime

Military Vendors Scrutinized for Contract Fraud

A rash of negative publicity over the past six months has the United States Navy investigating government contractors for criminal fraud.  Government contract fraud occurs when a private vendors contracts with a government entity to provide a good or service and intentionally and fraudulent overbills.

Within the past couple of weeks, white-collar attorneys learned with interest that Navy Secretary, Ray Mabus, established a task force to address the Navy’s susceptibility to fraud by its own vendors.

These problems all came to light in the fall of 2013 when Leonard Glenn Francis, the owner of “Glenn Defense Marine Asia” was arrested and charged with bribery.  Francis’ company was a large supplier to the United States Navy in the Pacific is alleged to have bribed United States Navy Officials to turn a blind eye to his company’s system of overbilling the federal government.

Also, the Justice Department is purportedly investigating Inchcape Shipping Services on allegations of overbilling.  For years, Inchcape was a major Naval supplier in the Middle East and Africa.

It is unclear whether any domestic United States companies are actively under investigation, but any vendors to the United States Navy, or any other branch of military, would be wise to make sure their books are ship shape, or else they could face criminal prosecution.

Pro Hac Vice and Local Counsel in Alabama

At Parkman White, LLP, our practice often takes us to foreign jurisdictions.  While we have attorneys licensed in Alabama, Florida, Mississippi, Tennessee, Louisiana, D.C. and New York, we often handle cases outside these areas, and have to go through the process of requesting admission to the foreign jurisdiction “pro hac vice.”  We know that these applications have to be filed and granted quickly to avoid any concern by the client.

Because we know what it is like to handle cases across the country, we often act as local counsel for attorneys seeking admission pro hac vice in Alabama and have learned to navigate the requirements.  Rule 7 of the Rules Governing Admission to the Alabama Bar requires that before a foreign attorney may practice in Alabama pro hac vice, they must associate with local counsel and file an application with the State Bar.  This application requires the foreign attorney list all jurisdictions in which they are admitted, and certify all disciplinary actions to which they have been subjected.  The foreign attorney must also attach a certificate of good standing dated within 60 days of the application.

The cost of being admitted to Alabama pro hac vice, (not including the costs of local counsel and the costs of obtaining a certificate of good standing) is currently $325.00.  Three hundred ($300.00) dollars is the filing fee, while twenty-five ($25.00) dollars is for the Alabama State Bar client security fund.

While foreign attorneys are usually anxious to get their applications filed and approved, the Alabama State Bar requires 21 days notice before a hearing can be held on the pro hac vice application with the Court.  After receipt of the pro hac vice notice, and the filing fees, the State Bar will certify to the judge presiding over the case that the application is in order.  Then 21 days later, the judge is allowed to approve the application.  Unfortunately, the Alabama State Bar has a policy that the pro hac vice application cannot be approved until the Alabama State Bar sends a statement approving the application to the judge, which cannot be done in less than 21 days from filing the application.  This requirement appears to be unique to the Alabama system, as our firm has not encountered such a requirement in other states.

If your firm has an Alabama client, but you are not a licensed Alabama attorney, make sure you familiarize yourself with the pro hac vice and local counsel requirements.  It is important for you to act quickly due to the 21 day delay built into the approval process, so that you are admitted in a timely manner.

Corporate Sentencing

Once there was a clear distinction between corporate law and criminal law, with few exceptions that operated illegally. Upon the enactment of the United States Sentencing Commission, especially it’s Sentencing Guidelines; federal law concerning sentencing was drastically changed. While the Sentencing Guidelines first applied only to individuals, in 1991 the Commission enacted a set of guidelines that subjected corporations to the rules.

The purpose behind the guidelines was to actively recruit corporations to monitor and police white collar crime. The guidelines define a good corporate citizen as one who makes effective efforts to deter corporate crime, as well as one who promptly reports failures of those efforts to authorities. By assuring that these two standards are upheld, corporate counsel can effectively minimize the firm’s legal exposure at any given time. However, failure to ensure a company’s “good corporate citizen” standing can result in severe penalties, harsher than ever before in our country’s history.

Sentencing guidelines were heavily influenced by the optimal penalties theory. Under this theory, a corporation would not break the law as a rational actor unless it was reasonable to expect a profit. The expected profit is the amount of profit times the probability of getting caught. The expected liability is the penalty times the probability of getting caught. If the expected liability exceeds the expected profit, then the corporation will not break the law. The penalties are optimal because if lower they would not deter crime, and if higher would discourage legitimate business.

The creation and maintenance of an effective compliance program is a basic responsibility of a public corporation. Consider the following opinion of the Court of Chancery of Delaware:

“The Guidelines offer powerful incentives for corporations today to have in place compliance programs to detect violations of law, promptly report violations to appropriate public officials when discovered, and to take prompt, voluntary remedial efforts…

“…any rational person attempting in good faith to meet an organizational governance responsibility would be bound to take into account the development of the guidelines and the enhanced penalties and opportunities for reduced sanctions that it offers.”

If you find yourself facing criminal charges, it is important to find an experienced white collar attorney to represent you.  The attorneys of Parkman White, LLP have a history of success in the court room and are ready to represent clients nationwide.

Theft of Trade Secrets

Theft of trade secrets has historically been a hard area to prosecute. Due to the relative ease of accessing and transporting information as opposed to tangible goods, “industrial espionage” has become more and more prevalent as firms seek to gain an edge over rivals. Furthermore, since the stolen information often remains undisturbed and available to the owner, such theft can be virtually undetectable. Since the enactment of the Federal Economic Espionage Act of 1996 (EEA), the theft of trade secrets is a federal offense. It is important to understand this law and its implications.

What is a trade secret?

The EEA defines a trade secret as that which is “not generally known to, and not readily ascertainable through proper means by the public.” While protecting scientific and technical information, this broad language also covers such business information as marketing data and customer lists. Such information is protected regardless of the form it is in, which means even memorization of trade secrets can constitute misappropriation.

What are the rules?

The applicable rules of the EEA are divided into two sections, and which one is applicable depends upon whether the theft was intended to benefit a foreign government or not. If so, the taking, receipt, duplication, communication, or alteration of trade secrets are prohibited, as well as any attempts or conspiracies toward these acts. If the trade secret theft was not intended to benefit a foreign government, then the nature of the secret determines whether the second section is applicable. In order for the act to constitute trade secret theft in this case, there must exist an intent to convert a secret “related to or included in a product” for economic benefit. This strange wording excludes domestic “information terrorists,” whose intent is purely malicious. It also seems to exclude any information related to services, the fastest-growing segment of the economy.

What are the penalties?

The consequences for violations of the EEA depend upon whether the offender was an individual or an organization, and whether the act was intended to benefit a foreign government. If “general,” or not for the benefit of a foreign government, an individual faces a maximum of $250,000 in fine and 10 years imprisonment. An organization charged with the “general” offense faces up to $5 million in fines. If either the individual or the organization intended to benefit a foreign government, the fines and imprisonment double.

If you find yourself facing criminal charges, it is important to find an experienced white collar attorney to represent you.  The attorneys of Parkman White, LLP have a history of success in the court room and are ready to represent clients nationwide.

Pink Collar Cases Welcome at Parkman & White

At Parkman & White, our attorneys have extensive criminal trial experience representing “white-collar criminal” defendants.  “White Collar” crime has traditionally been the term to describe financially motivated crimes committed by deception, rather than by force.  Jim Parkman and William White have created a niche representing those accused of “white collar” crimes such as bankruptcy fraud, mortgage fraud, healthcare fraud, wire fraud, public corruption, and the like.

In referring to our firm as “white collar”, it never crossed our mind that such a term might just be sexist.  We recently came across an interesting blog that seems to have coined the phrase “Pink Collar Crime.” “Pink Collar Crime” is simply traditional white collar crimes committed by members of the fairer sex.

As reported on www.pinkcollarcrime.com, there has been a noticeable increase of white collar crimes committed by women, with the increased influence of females in the workplace.  Our firm’s own experience supports the theory that a substantial percentage of work place embezzlement cases are committed by women.  The traditional recipe for such a case is: 1. A female employee who has a financial need, and 2. The employee is presented with an opportunity to fill that need by taking from her employer.

Such pink collar crimes are often committed by long time trusted female employees who have control over the companies books, with little supervision.  Over time, the female employees notice that they lack supervision, and suspect they may be able to get away with a small theft.  Often times, the employees intent does not start as a theft.  It is typical for the employee to “borrow” the money from the employer, without the employer’s knowledge or permission, while fully intending to pay back the loan.  The problem is, there is never enough money to pay the loan back, and when noone notices, the employee continues to “borrow” money to meet her needs.

Pink Collar Crime is certainly not limited to employee embezzlement, as we have represented numerous women charged with Medicare and Medicaid Healthcare Insurance Fraud, Mortgage Fraud, Bankruptcy Fraud, Securities Fraud, Bank Fraud, and more.  However, no matter what the scheme, the formula is usually the same.

The formula also usually includes the woman attempting to justify her actions.  Often the woman is just trying to make a better life for her and her family.  She sees others in the business making more money than she is, while she is working just as hard.  She sees others in the business making ethical, moral, or criminal mistakes, and feels they won’t prosecute her with all the dirt she has on them.

The problem is that almost without fail, pink collar crimes are eventually detected and you WILL need an attorney.  Our firm has been successful in avoiding prosecution for many of our pink collar cases.  So if you are suspected of committing a “pink collar” offense in Alabama, Florida, New York or anywhere in the United States, our “white collar” lawyers don’t discriminate, and would love to help you.

Rich Couple Imprisoned for Federal Welfare Fraud

A couple with a lakeside home in an affluent Seattle neighborhood will be locked behind bars for 18 months because of welfare fraud charges.

On Friday a federal judge sentenced David Mark Silverstein, 60, and his partner Lyudmila Shimonova, 53, to federal prison for making false statements in order to receive federal assistance.

Silverstein has already paid $206,970 in fines and penalties as well as $160,000 in restitution in a related civil case that the US Government filed against him. After this criminal sentence he will also have to pay an extra $30,000 and remain under federal supervision for three years after being released from prison.

Similarly, Shimonova was fined more than $261,000 in restitution and faces three years of supervised release.

Federal prosecutors ensured a particularly long sentence for the couple by pointing out that the couple was already enjoying a relatively affluent lifestyle without the government aid. Prosecuting attorney C. Seth Wilkinson told the court that “The defendants committed these crimes out of greed, not need.” Most persons who welfare fraud are relatively impoverished and use the money to make themselves slightly more comfortable. Silversteen and Shimonova on the other hand enjoyed a life of luxury. They owned a lakefront home, with a boat. Silversteen drove a jaguar and Shimonova owned jewelry worth in excess of $60,000.

Investigators argued that Shimonova received more than $100,000 in federal housing assistance, which was paid to Silverstein, who was listed as her landlord. She also received much more assistance from other programs for needy families. Although Shimonova had no children and shared income with Silverstain, the couple reported that she was a single mother of two and struggling to make ends meet.

Silverstein’s attorney said that the criminal charges have cost Silverstein dearly. Silverstein has been shunned by his friends and was forced to close his business. This illustrates that the social repercussion of criminal charges such as fraud can be far worse than any punishment imposed by the court.

IRS Awards $104 Million to Whistleblower In Hopes of Spurring More Informants

Earlier this month the IRS awarded $104 Million to Bradley Birkenfield for revealing tax fraud committed by UBS bank.

Birkenfield was a former employee of the famous Swiss Bank. The bank came under scrutiny by the IRS in 2009 when it was charged with helping wealthy Americans hide their assets in bank accounts to evade tax liability. Because of Birkenfield and the IRS’ investigation UBS agreed to pay the IRS $780 million in fines, penalties, interest and restitution in exchange for an agreement to defer prosecution of the charges.

Although Birkenfield revealed many of UBS’ secrets, he was also charged and convicted of unlawfully withholding other information. As a result Birkenfield spent 30 months in prison, and was not able to collect his reward money until he was released earlier this month.

By the time Birkenfield received his money from the IRS, the actual amount he owned declined dramatically considering the costs of his own legal battle with the IRS and accompanying fines and penalties. Nevertheless Birkenfield definetly came out ahead, he reaped nearly $44 million after these expenses.

Birkenfield’s reward was the highest reward ever received by a single individual. Some legal experts believe that because of Birken’s high reward more informants will likely come forward in the hopes that they can also cash in on calling out fraud.

Nevertheless, the IRS is by far the biggest winner in this story, because of Birkenfield’s information the IRS was able to collect roughly $5 billion in taxes from banks and wealthy individuals.

Although Birkenfield was released from prison he is currently under home surveillance, and living in a friend’s estate in New Hampshire.

FBI Ties Economy to Increase in White Collar Crime

The FBI has recently released some sobering statistics, for anyone who is planning to make any large investments any time in the near future. According to recent reports, investigations by the FBI into commodities and securities fraud have become 50% more common.

Of course, that could mean one of 2 things: Either commodities and securities fraud have become 50% more common, or the FBI is taking them more seriously and simply investigating more of the cases. Realistically, it is probably some combination of the 2.

Regardless, commodities and securities fraud are both very common, and warrant some caution. Both of those are actual rather broad categories of scams, including many better known sub-categories. One of the most common forms of securities fraud is called affinity fraud, named because it relies on a potential investor forming a trust, or “affinity,” to the scammer, with the hope that they will trust their money to them as well.

Another common form of investment fraud is called prime bank investment fraud, which is where investors will be part of a small, exclusive group, which has special access to investments.

Part of the reason that the FBI suspects that are seeing instances of white collar crime such as this increasing lately is the economy. It is no mystery that the economy is suffering, which the FBI believes is driving individuals to look for better financial returns for their investments, which inevitably means greater risk, and greater risk of fraudulent investing.

It is not always worth the extra risk, though, as New Jersey Bureau of Securities Chief Abbe Tiger points out: “The interest rates are very, very low, unfortunately, that people can get on conservative investments and everybody is looking to bring a higher yield. But, you must really be careful because instead of bringing a higher yield, you could lose everything.”

Making Waste Greener

Waste is inevitable. As humans we are just going to create waste. The trick is to find ways to help keep the environment as clean as possible while doing so. This can be a challenge, but there are some ways that waste management companies in the beautiful state of Georgia are helping.

A big issue in our state, as well as the others across the U.S., is that about 40 percent of our solid waste is recyclable. These recyclable materials hold a market value of over $250 million, but instead we are spending close to $90 million to dispose of them.

Statewide we are getting kids involved through education about the environment and how to help preserve it through a new program called Georgia Green & Healthy Schools (GGHS). This program was created to integrate and facilitate access to local, state, and national environmental resources to assist schools in their goal to practice environmental stewardship.

There are also guidelines to help with hazardous waste management as well. The Georgia Rules of Hazardous Waste Management (Rules) adopt the federal Resource Conservation Recovery Act (RCRA) regulations, which are designed to ensure that the generation, transportation, treatment, storage and disposal of hazardous wastes are conducted in a manner that provides maximum protection to human health and the environment.

Georgia Power is in on the environmental health train by equipping coal-fired power plants with the latest environmental controls to reduce emissions of sulfur dioxide, nitrogen oxides and mercury.

Working together, we can help protect our state’s resources and preserve them for future generations. Protecting our air, soil and groundwater is of utmost importance in seeing to it that Georgia stays the beautiful gem she is.

IRS Steps Up Probe of Offshore Banking in Israel

Several weeks ago the U.S. Department of Justice unleashed indictments against three tax preparers doing business under United Revenue Service (URS). U.S. Department of Justice attorneys say that the tax preparers with URS helped wealthy Americans open accounts in Israel and failed to file the required Report of Foreign Bank and Financial Account (FBAR) with the IRS.

Having a bank account outside the U.S. is completely legal so long as certain information about the account is disclosed to the IRS. This information includes the amount held by the bank, and the amount of interest accrued annually. This information is required in the annual FBAR. When these are not properly submitted to the IRS penalties can be quite extraordinary. Willful failure to file an FBAR carries prison time and fines of $100,000 or 50% of the account balance for each year the account is not reported; whichever number is greater. Although, a foreign account holder may be able to avoid this penalty if their failure to report was unintentional. In some cases the individual could negotiate with the IRS to pay a lesser onetime penalty.

The tax preparers in the recent indictment allegedly not only failed to file an FBAR but also actively tried to conceal the account holder’s identity by helping the customers set up sham corporations in Belize. These sham organizations are known as nominee corporations. The corporation is named as the bank account owner so that any inquiries into the account will only show the corporation’s information rather than the true account owners.

However, URS’ actions were unlawful because banks have a legal duty to disclose the owners who benefit from corporate accounts. This makes the chances of getting caught by the IRS even greater.

To combat this problem the IRS has also stepped up monitoring of lawyers, accountants, and individual bankers over the past years to stop them from setting up sham corporations to mask the true identity of offshore account holders. When these professionals have been accused of engaging in tax evasion in most cases they turn over the list of their customers to the U.S. Department of Justice in order to receive reduced fines and jail time.

Customers of the Israeli banks targeted in the recent indictment should take action immediately. The IRS’ plan is to charge the tax preparers who set up the nominee organizations in order to get enough information to next target the account owners who benefitted from the scheme. However, account owners can protect themselves by reporting themselves to the IRS first. The IRS has a first contact policy which means that the IRS may waive criminal prosecution if you come forward before the IRS contacts you. However, if the IRS contacts you in anyway including by mail, phone, or in person, the first contact policy will not apply.

Foreign account holders still have time to come into compliance and avoid penalties or prison time. The IRS has an amnesty program known as the Offshore Voluntary Disclosure Program, or OVDI. Persons who report their activity under OVDI benefit from fixed and reduced penalties. Persons who self report under OVDI also avoid an audit and criminal prosecution.