Fraud Cases

The Federal Docket

United States v. Spirito (4th Cir. May 2022)

The Fourth Circuit affirmed a defendant’s conviction for several fraud offenses but reversed his conviction for federal program fraud under 18 USC 666. At issue was whether Section 666 “criminalizes multiple conversions of less than $5,000, if the government must point to conversions that took place over more than one year to reach the $5,000 statutory minimum.” The Court held that Section 666 “requires each transaction used to reach the aggregate $5,000 requirement to occur within the same one-year period.”

United States v. Garbacz (8th Cir. April 2022)

The Eighth Circuit reversed some, but not all, of a defendant’s convictions for multiple counts of wire fraud where, after depositing embezzled funds from his church, the defendant-priest made several payments from that account using those funds. The Court upheld the defendant’s convictions based on the deposits since they furthered the scheme but reversed those based on the payments, since those payments did not help further or conceal the offense.

United States v. Lonich (9th Cir. January 2022)

The Ninth Circuit vacated defendants’ sentences for fraud, which had been enhanced by 20 levels under USSG 2B1.1 based on the loss resulting from the closure of a bank due to defendants’ offenses. The Court held that, where an enhancement has “an extremely disproportionate effect on the sentence,” the underlying facts must be shown by “clear and convincing evidence.” Here, it was not clear and convincing that defendants had caused the bank to collapse.

DOJ Appoints a “Director for COVID-19 Fraud Enforcement”

On March 10, 2022, the Department of Justice issued a press release announcing the appointment of a “Director for COVID-19 Fraud Enforcement,” a position that would head the DOJ’s criminal and civil enforcement actions relating to COVID-19 relief fraud. To date, the DOJ reports over $8 billion in alleged fraud, including PPP and EIDL loan fraud and unemployment insurance fraud….

Regarding PPP and EIDL loan fraud, the DOJ announced that “approximately 500 defendants have been charged in over 340 cases with alleged intended losses of over $700 million.” The DOJ also claims to have seized over $1 billion in EIDL loan fraud proceeds. Regarding unemployment insurance fraud, the DOJ announced that “over 430 defendants have been charged and arrested for federal offenses related to UI fraud.”

DOJ Launches “Expansive” Criminal Investigation of Short Sellers

ast week, media outlets reported that the Department of Justice has launched “an expansive criminal investigation into short selling by hedge funds and research firms.” Among other things, the government is studying the relationships between hedge funds and the sources that publish reports that affect how a company’s stock price is performing. In other words, the government is scrutinizing whether firms that publish negative reports on certain companies are colluding with hedge funds that are shorting those companies’ stocks, and investigators are also looking into potential insider trading and other abuses.

United States v. Nicolescu (6th Cir. October 2021)

The Sixth Circuit affirmed the convictions of two defendants charged with operating a large cyber fraud scheme involving fake car auctions on ebay, stolen identities, and cryptocurrency. The Court vacated their sentences, however, after finding that they erroneously received an enhancement for receiving stolen property and being in the business of receiving and selling stolen property, since the enhancement does not apply to defendants who sell property they themselves stole. The Court held that the enhancement for production or trafficking of unauthorized access devices did apply, however, even though the defendants were already being sentenced for aggravated identity theft.

United States v. Yates (9th Cir. October 2021)

The Ninth Circuit reversed the convictions of two defendants who had been convicted of conspiracy to commit bank fraud and making false bank entries. The two bank executives had lied to shareholders about the bank’s financial status and had made unauthorized transfers to hide the bank’s poor performance. However, the defendants did not attempt to enrich themselves or deprive the bank of its funds. The Court affirmed the district court’s order of acquittal based on insufficient evidence. The bank did not have a cognizable property interest, under the fraud statute, in the accuracy of its financial interests. Nor was it deprived of its property interest in the defendants’ salaries since the defendants were doing the job they were paid for.

United States v. Lillian Akwuba (11th Cir. August 2021)

The Eleventh Circuit affirmed a nurse practitioner’s convictions for drug conspiracy and healthcare fraud in a “pill mill” case. The Court held there was sufficient evidence to convict her of the drug offenses despite the government’s failure to provide any patient testimony that the prescription medications they received were unnecessary, and it affirmed her conviction for healthcare fraud based on her knowledge and participation in filing claims to government programs for office visits where patients received illegal prescriptions. The Court held that the trial court erred in instructing the jury that the parties had stipulated to disputed fact, but held this did not amount to an improper directed verdict or deprive the defendant of her defense because the instruction did not relate to an element of the charged offense or any of the facts necessary to establish one of those elements, and the defendant was still able to present her theory of defense. The Court also rejected the defendant’s evidentiary claims.

US Attorney’s Office in Atlanta Issues Update on PPP Loan Fraud Cases

The US Attorney’s Office for the Northern District of Georgia has issued a press release regarding the latest developments in some of its fraud cases involving COVID-19 relief funds. Our firm has also compiled a list of COVID-19 relief fraud cases from across the country with the kinds of charges and sentences in each case (link in the post).

United States v. Arman Abovyan (11th Cir. Feb. 2021)

The Eleventh Circuit affirmed a doctor-defendant’s conviction for healthcare fraud and dispensing controlled substances unlawfully. The Court held that there was sufficient evidence tying him to the conspiracy based in part on his allowing a medically non-trained co-conspirator to mandate testing requirements, and the Court also found sufficient evidence of unlawful dispensation based on the government expert’s testimony. The Court also held that the district court did not err in using the intended loss amount at sentencing, despite using the lower actual loss amount for the defendant’s co-conspirators, since there was no “unwarranted” disparity given that the co-conspirators had been sentenced according to a plea agreement, and the defendant had not.

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