Federal Crimes

Criminal Prosecutions of Mortgage Fraud on the Increase

Published on: January 27, 2009 | by Lasnetski Gihon Law

In Florida and across the country, prosecutors are bringing more criminal cases against people suspected of committing mortgage fraud. Mortgage fraud can be committed in a number of ways. Some examples include: buyers using fake identities to obtain loans and purchases houses, using fraudulent appraisals to inflate the price of a house so it can be resold at an artificially high price, paying bribes or kickbacks to get mortgages approved and forging mortgage documents (i.e. falsifying a buyer’s income to make it appear that he/she is able to afford a higher mortgage) to get a mortgage approved.

When mortgage fraud is committed, houses are sold to people who would not be able to afford them under normal circumstances, and housing prices become artificially inflated. The result is that ultimately mortgages are not paid and there are numerous foreclosures which can crash the housing market. A crashing housing market affects most homeowners, not just the ones who obtained their home by fraudulent means. Another result is that mortgages become much harder to get for everyone, which of course negatively affects the sale of homes and further drags down the housing market.

The United States Justice Department has formed more than 40 mortgage fraud task forces across the country, and federal mortgage fraud cases have more than doubled over the last few years, according to an article at www.Sfgate.com. In that time period, it is estimated that mortgage lenders have lost approximately $4 billion. Florida and Georgia are among the states with the highest foreclosure rates. Florida and two other states have half of the country’s mortgage fraud complaints over the last few years.

Jacksonville Law Firm Lasnetski Gihon Law Has Blog Post About Federal Criminal Liability for Companies Published in Jacksonville Business Journal

Published on: January 25, 2009 | by Lasnetski Gihon Law

Last Month, the Jacksonville, Florida law firm of Lasnetski Gihon Law which handles state and federal criminal defense, personal injury, wrongful death and business litigation matters in Jacksonville and throughout Florida and Georgia prepared a blog post about an issue that has potentially crippling ramifications for companies but of which few companies are aware. The issue relates to the low standard that is applied when attributing vicarious criminal liability to companies based on the unlawful acts of their employees. The blog post can be read here. The Jacksonville Business Journal read the post and asked to publish a copy of it. A version of the post more suitable to that publication can be found here.

The post and the article were written as a reaction to our reading of a federal criminal case out of the Second Circuit called United States v. Ionia Management. We thought it was troubling how a company can be faced with severe financial penalties based on the conduct of any employee who commits a federal crime even if it is in derogation of company policies and procedures.

At the time of that blog post and that article, the Ionia Management case was still pending. Since that blog post, the Second Circuit has affirmed the ruling discussed in the post and the article. As a result, companies looking for a higher standard for vicarious criminal liability obtained no relief from the Ionia Management case.

St. Augustine Woman Wanted by Police for Allegedly Dumping Hazardous Waste From Flagler Hospital

Published on: January 20, 2009 | by Lasnetski Gihon Law

A St. Augustine, Florida woman (Pamela Niland) allegedly dumped hazardous waste taken from Flagler Hospital, including vials of blood and drugs and old needles, into a dumpster belonging to a St. Johns County construction company, according to an article at Firstcoastnews.com. As most people know, hospitals and doctors’ offices have procedures and waste containers for properly and safely disposing of such hazardous materials. According to the article, the crime was caught on a surveillance camera and also observed by a witness. Pamela Niland had not been arrested as of the time the article was written.

This article reminded me of a post I wrote last month about companies that can be criminally liable for the actions of their employees. That post was published in the Jacksonville Business Journal, and it discussed how a company can be held criminally liable for the acts of an employee if the employee commits an act in violation of federal law while acting in the course and scope of his/her employment and acting to benefit the company. As the federal law currently stands, in such a case, it is not a defense for the company to show that the employee was a low-level employee or that the company undertook efforts to prevent such unlawful acts. I am not suggesting that Flagler Hospital would be criminally liable in this reported case- there is no indication that the federal authorities are involved, and it is not clear if Pamela Niland was an employee of Flagler Hospital at the time this act was allegedly committed. However, this can be the type of unlawful act committed by an employee that unexpectedly implicates an employer and subjects the employer to severe financial penalties for something over which they may have had little or no control.

Corporations May Be Criminally Liable for the Acts of Their Employees

Published on: December 18, 2008 | by Lasnetski Gihon Law

Where a company employee commits a federal crime while acting in the course and scope of his/her job duties and acts with the intent to benefit the company, the company will likely be criminally liable for the employee’s actions along with that employee. This is called vicarious liability, where one person’s or party’s criminal act confers liability upon a second, related person or party.

The standard for vicarious criminal liability in the federal criminal system is quite low. Basically, where any employee commits a criminal act while working pursuant to his/her job duties and the criminal act was done to benefit the company, the company will also be criminally responsible no matter where the employee fits on the company hierarchy and no matter what efforts the company undertook to prevent the criminal act. In other words, the employee who commits the criminal act can be the lowest level employee and the company can have a variety of strict and thorough policies and procedures in place to deter the criminal conduct, and the company can still face severe financial penalties for the employee’s criminal act.

In the Second Circuit (New York), federal criminal attorneys are arguing to change this low standard which basically amounts to automatic criminal liability for a company if the the factors mentioned above are met. Pursuant to the case United States v. Ionia Management where a large commercial oil tanker company’s employees dumped waste into the sea while shipping oil for the company in violation of federal criminal law, criminal defense attorneys are arguing that the standard for vicariously attributing criminal liability to a company for the conduct of its employee(s) should be raised to apply only where the employee(s) is a higher level, managerial employee and should take into account whether and to what extent the company had policies and procedures in place to try and prevent such criminal acts from occurring. This would not only allow for a more reasonable and considered application of corporate liability for the actions of employees but also encourage corporations to proactively deter employees from committing criminal acts.

Woman Convicted of Federal Crimes for Misusing Myspace Website

Published on: December 15, 2008 | by Lasnetski Gihon Law

A Missouri woman was convicted of three federal misdemeanor crimes for pretending to be a teenage boy, courting a 13 year old classmate of her daughter’s and then sending abusive messages over Myspace to the young girl. Apparently, one of the messages sent by the defendant told the young girl that the world would be better a better place without her. The girl, who was suffering from depression, committed suicide.

As a result, federal prosecutors in Los Angeles, where the Myspace servers are located, charged the Missouri woman with three misdemeanor counts for violating the federal Computer Fraud and Abuse Act. Some were critical of these charges because the Computer Fraud and Abuse Act was originally conceived to deal with computer hackers, not people who send inappropriate and abusive messages over social networking sites like Myspace. This prosecution represented an extension of that law to include inaccurate information sent over social networking websites, which have become very popular with young people and are increasingly popular among older people and professionals. While this case was obviously an extreme example of Internet abuse with tragic results, it does raise the concern that prosecutors can use federal laws designed for another purpose to charge people with crimes for being abusive and sending out false information over the Internet. There is no specific federal criminal law that specifically addresses that type of behavior over social or professional networking sites
At the trial, prosecutors were able to use the fact that the Missouri woman violated the Myspace terms of service which require Myspace users to transmit accurate and truthful information. In addition to the fact that few people read the lengthy terms of service information before signing up for such a website, this also raises the concern that a private company is setting standards that can be used to substantiate a criminal prosecution. If the rules and regulation set forth by a website like Myspace can form the basis for a criminal prosecution, people should be notified as such before registering for the site. Additionally, if websites like Myspace have some influence over the standard to be used to define criminal behavior on their website, should such websites then have some obligation to prevent its users from committing those crimes on their websites. In other words, if a Myspace user is being verbally abusive towards another user, does Myspace have an obligation to monitor that activity and delete the abusive comments and cancel the accounts where the Myspace terms of service are being violated in such a way that criminal laws are possibly being violated?

Driver’s License Employees Charged with Identity Theft and Conspiracy for Issuing False Licenses

Published on: December 3, 2008 | by Lasnetski Gihon Law

Four Department of Driver Services employees in Georgia (similar to the Florida DMV) were charged with the federal crimes of identity theft and conspiracy to commit fraud after allegedly issuing false driver’s licenses to over 130 illegal immigrants. According to an article at AJC.com, the illegal immigrants paid $7,000 – $8,000 to obtain a Georgia driver’s license without having to take any tests or show proof of residency.

Additionally, the federal criminal defendants are also charged with issuing commercial driver’s licenses (CDL) to themselves and one other person. A CDL allows a person to drive semi trucks or commercial buses professionally. Normally, a person has to take a test prior to obtaining a CDL to make sure the applicant can operate a semi truck or bus and understands the rules and regulations governing semi truck drivers. According to the federal indictment, the defendants manually recorded passing scores into the system for the CDL recipients bypassing the testing requirement. The recipients then went on to obtain jobs as bus drivers in 2007 for MARTA, which is the public transportation system in the Atlanta area.

Florida Students Charged with Federal Crimes for Changing Grades

Published on: November 16, 2008 | by Lasnetski Gihon Law

Students at Florida A & M University were indicted recently for allegedly hacking into the school computer and changing the grades and residency status of approximately 90 people, according to a local news website. According to school and law enforcement officials, the students changes numerous grades from F’s to A’s and changed the residency status of students to instate so that the students would be eligible for financial assistance and grants and the cheaper instate tuition. The three students at Florida A & M in Tallahassee, Florida were indicted by a federal grand jury on charges of conspiracy to commit wire fraud, unauthorized computer access, aggravated identity fraud and identity fraud. If convicted, the students face significant prison time.

According to reports, the Florida A & M students were able to access the school’s network and change the grades by installing a keystroke logger that records the keystrokes of the person using the school computer and allows a hacker to learn the username and password. This and other identity theft techniques have been discussed previously on this blog here.

What Does a Defendant Need to Know to Commit the Federal Crime of Aggravated Identity Fraud?

Published on: November 7, 2008 | by Lasnetski Gihon Law

Largely in an effort to crack down on illegal aliens in the United States, the government enacted the federal crime of aggravated identity fraud which is punishable by a mandatory two year prison sentence. This is a very severe mechanism used by the federal government to address the issue of illegal aliens coming into the US and obtaining fake social security cards and other forms of identification in an effort to obtain jobs and other benefits.

However, it is not clear, and the circuits are divided as to, what exactly the government needs to prove to establish that a person is guilty of the federal crime of aggravated identity fraud. The criminal law provides that a person commits aggravated identity fraud when he/she knowingly and without authority uses a means of identification of another person. For example, an illegal alien may come to the United States and create a fake social security card using nine numbers chosen at random. If those nine numbers do not form the sequence of a real person’s social security card, did the person who created the social security card commit the crime? In other words, in order to be guilty of aggravated identity fraud and receive the mandatory two year prison sentence, does the person who created the fake social security card need to know that he/she is using the card without authority or does he/she need to know that the social security number actually belongs to another person?

If it is the latter, it makes the crime much harder to prove as the government would ostensibly have to show that the social security number was a real one that actually belonged to another person and the defendant knew it. Clearly, it would be easier for the government to merely have to prove that the defendant knew he/she was improperly using the social security card or number regardless of whether he/she in fact knew if it belonged to anyone else.

Federal Prosecutors Issue New Policies Regarding Credit for Cooperation of Criminal Defendants

Published on: September 12, 2008 | by Lasnetski Gihon Law

In the federal criminal system, when a person is arrested for a crime, or a corporation is being investigated for criminal conduct, credit for cooperating with the government can be obtained which can translate into a lower sentence. Federal law enforcement officials may ask a corporation’s representatives to cooperate by identifying wrongdoers in the corporation, identifying and producing relevant documents and/or testifying about corporate practices. However, when the request to cooperate is made by the federal prosecutors, it may infringe on a criminal defendant’s Constitutional rights, such as the right to confidential communications with his/her attorney.

Last month, the Department of Justice issued new policies regarding how federal prosecutors are to handle the balance between credit for cooperation and the privileged communications involving a corporation and its employees. The new policies indicate that the government will not base credit for cooperation on whether a corporation waives the attorney-client privilege (communications about the case between a client and the attorney) or the work product privilege (documents and information created in anticipation of preparing for and litigating the case). Rather, credit for cooperation will depend on the disclosure of facts. In other words, whether a corporation waives either privilege will not be the issue. Whether the corporation discloses the information sought, regardless of whether it is protected by the attorney client privilege or work product privilege, will determine whether credit is received.

It is helpful that the government is not specifically expecting and anticipating a suspect or defendant to waive his/her protected attorney-client and work product privileges when deciding if credit for cooperation is appropriate. However, in many cases, this may be a distinction without a difference, when the government is looking for information that falls within one or both of the privileges. Then, it will be up to the corporate representatives and the criminal defense attorney to decide whether waiving the privilege is in the best interests of the client(s). Additionally, it is important to note that the DOJ indicated there are two exceptions to this new policy, but those exceptions were not identified in the August 28, 2008 press release.

Can a Person Serve Prison Time for a Crime the Jury Said He/She Did Not Commit?

Published on: August 22, 2008 | by Lasnetski Gihon Law

The answer is yes in federal criminal court. Most of us understand the criminal system in Florida to provide that if a criminal defendant is acquitted (i.e. found not guilty by a jury) of a crime, that defendant should not serve any prison time based on that criminal charge. That seems to make sense; a criminal should only be punished for crimes he/she actually committed. However, it often does not work that way in the federal criminal system. In federal court, a defendant who is found guilty of one charge but not guilty of a second charge may have the conduct related to both charges considered to increase his/her sentence.

For instance, consider a case where a criminal defendant was charged with possession of cocaine in one count and illegal possession of a firearm in a second count. The jury convicts the defendant of the cocaine charge but finds him not guilty of the gun charge. The judge can, and likely will, also consider the defendant’s conduct related to the gun charge in determining the sentence even though the jury acquitted the defendant of that charge. Further, in order to convict a defendant of a crime, the jury must find that the defendant committed the crime beyond a reasonable doubt, which is a fairly high standard. The judge is only limited by a preponderance of the evidence standard when deciding whether to consider conduct for which the defendant was found not guilty of a crime in ordering his/her sentence. The preponderance of the evidence standard (greater than 50% likelihood) is much lower than the beyond a reasonable doubt standard.

Therefore, a defendant in a federal criminal case has to be concerned not just with crimes he/she may have committed, but also with crimes that he/she did not commit but were still charged by the prosecutor. This raises another issue as to whether a prosecutor might add questionable charges against a defendant knowing that a jury may likely find the defendant not guilty but also that the conduct based on those extra charges can be used against the defendant during sentencing if he/she is convicted of at least one charge.