United States: White Collar Round Up - March 2017

Last Updated: March 8 2017
Article by Daniel E. Wenner

Does a Guilty Plea End Any Constitutional Challenges?

The U.S. Supreme Court will consider in Class v. United States "[w]hether a guilty plea inherently waives a defendant's right to challenge the constitutionality of his statute of conviction." The case involves Rodney Class, who is a retired veteran residing in North Carolina. Class traveled to Washington, D.C., in May 2013 and "left his lawfully-owned firearms secured out-of-sight in bags inside his locked vehicle," which he parked in a public lot about 1,000 feet from the U.S. Capitol. Class didn't know the lot was part of the "Capitol Grounds, where all weapons are prohibited pursuant to 40 U.S.C. 5104(e)." When Class was away from his vehicle, a police officer saw in the cab of the vehicle what she mistakenly believed was a gun holster. When Class returned, he was arrested and his vehicle was searched. The firearms were discovered, and Class was charged with violating §5104(e). Class raised several challenges to §5104(e), including under the Second Amendme­­nt and due process clause. The district court denied those claims, and Class pleaded guilty. Class then appealed to the U.S. Court of Appeals for the D.C. Circuit, claiming §5104(e) violated the Second Amendment and due process by failing to identify what comprises "Capitol Grounds." The court affirmed his conviction, holding that by pleading guilty, Class inherently had waived his constitutional claims. Because there is a circuit split on this issue, Class petitioned for a writ of certiorari, which was granted. To review the petition, click here.

Third Circuit Makes the Crime-Fraud Exception a Bit Tighter

The Third Circuit in In re Grand Jury Matter #3 narrowed the scope of the crime-fraud exception to the attorney work-product doctrine. The case involved, among others, Company A, John Doe and his lawyer. All of them were the subjects of an ongoing grand jury investigation into an allegedly fraudulent business scheme, which involved a purported sham sale of Company A, which Doe controlled. After the transaction, Company A and Doe were involved in litigation. During the course of the investigation, the government obtained an e-mails, which Doe claimed was protected by the attorney work-product doctrine. The e-mails included advice from Doe's lawyer, which Doe forwarded to his accountant, that referenced an ongoing litigation, and suggested Doe could amend his tax returns to gain an advantage in the litigation. The government sought and obtained permission from the district court to present the e-mails to the grand jury. The district court concluded the e‑mails was protected by the work-product doctrine but was in furtherance of a crime, so the crime-fraud exception applied. Doe appealed. The crime-fraud exception allows the disclosure of otherwise confidential communications when the party looking to disclose the document shows there is a "reasonable basis" to suspect (1) that the lawyer or client "was committing or intending to commit a crime or fraud" and (2) that the "attorney work product was used in furtherance of that alleged crime or fraud." The Third Circuit noted that in this case, Doe forwarded his lawyer's e-mails to his accountant but never amended his returns. He "at most thought about using his lawyer's work product in furtherance of a fraud, but he never actually did so." By so holding, the Third Circuit tightened the crime-fraud analysis by requiring that the movant show the defendant ultimately used the allegedly protected advice, not simply that he received it and shared it with others.

Neither Negligence nor Intentional Disregard Constitutes a Defense to Fraud

In United States v. Lindsey, the Ninth Circuit held that neither negligence nor intentional disregard by lenders is a defense in a prosecution for a mortgage-fraud scheme. Nicholas Lindsey was a mortgage loan officer and real estate broker who was convicted of wire fraud. Lindsey was involved in a scheme in which he would convince people to "buy" residential properties in exchange for financial assistance. Lindsey would build up their credit rating and deposit money into their accounts to obtain mortgages. He also falsified loan documents to make the borrowers appear more creditworthy and falsely stated their income. The goal was to obtain mortgages and then put the properties into foreclosure, garnering profits for Lindsey and losses for the lenders. Lindsey was indicted for wire fraud. At trial, "the district court precluded Lindsey from presenting certain evidence regarding the practices of particular lenders," related to the review of information on borrowers. On appeal, the Ninth Circuit held "that lender negligence in disregard of the information is not a defense to fraud, and so evidence of such negligence or intentional disregard by particular lenders is inadmissible as a defense against charges of mortgage fraud."

Sentence. Appeal. Remand. Sentence. Appeal. Remand.

In the second appeal of his sentence, Thomas Evans in United States v. Evans again got relief from the Tenth Circuit. The case arose from the sentence imposed after Evans pleaded guilty to conspiracy to commit mail and wire fraud. Evans had been the owner of a real estate development firm in Colorado. In his development efforts, he sold interests in certain limited partnerships. Unfortunately, he ran into some cash flow problems and provided false reports to investors and lenders. At his first sentencing, the district court calculated the losses attributable to his fraud at $12.3 million, concluded he victimized between 50 and 249 victims, and sentenced him to 14 years in prison. He appealed, and the Tenth Circuit "required the district court to recalculate the losses caused by the fraud and reconsider how the amount of the losses would affect the sentence." The district court did so, recalculating the losses at slightly over $4 million, and applied a four-level enhancement because of the existence of 50-249 victims. It then sentenced Evans to prison for a term of 121 months. In the second appeal, the Circuit concluded the district court had not followed its instructions from the first appeal and improperly calculated the losses and applied the enhancement. The Tenth Circuit vacated the sentence and remanded to the district court. While noting that the judge was not personally biased and did not act improperly, the Circuit also assigned the case to a new district judge. It reached this conclusion because in the initial remand, the judge expressed her view that the defendant had "stole[n]" $12 million, even though she concluded the losses were only $4 million. It also noted that "reassignment would preserve the appearance of justice" by avoiding a third sentencing by the same district judge for the same offense. And speaking of changing judges, Judge Neil Gorsuch heard oral argument for the panel, but, perhaps because of recent events, did not participate in the order.

SEC Gives Up on Retroactive Bars

As we reported here and here, the D.C. Circuit has vacated U.S. Securities and Exchange Commission orders that relate to conduct predating the Dodd-Frank Act but impose collateral bars authorized by that law. Specifically, in Bartko v. SEC, the D.C. Circuit held that the agency overstepped its authority by imposing a collateral bar on Gregory Bartko because that sanction was authorized after Bartko had engaged in the offending conduct. In a statement, the commission announced its determination "not to seek further review of that decision." It also invited individuals who are "the subject[s] of a Commission order imposing a collateral bar from associating in any capacity in the securities industry" for conduct that occurred before July 22, 2010 (Dodd-Frank's effective date), to "request that the Commission issue an order vacating the bar(s)," by completing a form available here. To temper that good news to affected parties, the statement notes, "This process applies only to collateral bars, which are bars that prohibit you from associating in a capacity in the securities industry with which you were not associated or were not attempting to associate at the time of your securities law violations." Moreover, it also warns that even if a collateral bar is vacated, any other lawfully imposed bars will remain in place.

Click here to read further Insights from Day Pitney

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Daniel E. Wenner
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions