July 2008

Dickie and Zach Scruggs were compelled to give depositions last week in McIntosh v. State Farm. It was reported (to no one’s surprise) that they invoked their Fifth Amendment rights. They wanted the depositions sealed, which State Farm opposed. On Wednesday, the transcripts were made public, and many of the questions posed by State Farm attorneys were certainly eye-openers, alleging details of a wide ranging scheme involving Trent Lott, Jim Hood, the Rigsbys and others. Y’all Politics has the details and the Sun Herald also has a story. State Farm on Tuesday filed an emergency motion to compel testimony, but considering the possible further criminal implications for both Dickie and Zach Scruggs, it would be surprising if the motion were granted.

Meanwhile, in a rewrite of Tuesday’s story, the Sun Herald reported Wednesday that the Rigsbys have obtained new counsel in the qui tam case, Gilbert Randolph of Washington.

Following its July 18 decision in the case of David Finnerty (earlier), a three-judge panel of the US Court of Appeals for the Second Circuit reversed (.pdf) the convictions of specialists Michael Hayward and Michael Stern, both formerly of Van der Moolen Specialists USA. Both were convicted of securities fraud in January 2007 in connection with an interpositiong scheme; both were sentenced to six months in prison. As in Finnerty, the Court ruled that the evidence was insuffcient to prove deception (Reuters).

The full US Court of Appeals for the Tenth Circuit in Denver on Wednesday agreed to review the March 17 decision of the three-judge panel which reversed the insider trading convictions of former Qwest CEO Joe Nacchio and remanded the case for retrial before a different circuit court judge (earlier). The court will consider only the issue which caused the reversal, US District Judge Edward Nottingham’s exclusion of law professor Daniel Fischel, who would have been the key expert defense witness. Oral arguments are scheduled for September 24. Nacchio remains free on bond (Rocky Mountain News, Reuters).

It’s beyond our scope to delve into all the filings in ex rel. Rigsby, the qui tam case filed by Kerri Rigsby and Cori Rigsby Moran, formerly represented by Dickie Scruggs. But the latest ones are of importance because if true, they confirm what those of us without blinders have suspected all along: that the whole production was staged by Scruggs from the beginning, well before either he or the Rigsbys insist they met each other.

State Farm has filed a response opposing Provost Umphrey’s entry for the Rigsbys, as they earlier indicated they would. In support of certain of the arguments in that motion, State Farm also presented transcripts from adjuster Tammy Hardison and her assistant Dana Lee, former Rigsby coworkers at E. A. Renfroe. We won’t go into all the jaw-dropping details, but David Rossmiller has an excellent and hilarious review of the content. We agree with his assesment: “The Ride of the Rigsbys is definitely over, finished, bye-bye, ancient history, kaput, ausgespielt.” Anita Lee at the Sun Herald has a story here.

Debra Harrison of Trenton, New Jersey, a lieutenant colonel in the Army Reserves, pleaded guilty on Monday to honest services wire fraud before US District Judge Mary Cooper in Trenton. Harrison is yet another figure in the scheme to defraud the Coalition Provisional Authority - South Central Region (CPA-SC) by construction contractor Philip Bloom, who bribed persons connected with CPA-SC in exchange for the award of Iraqi reconstruction contracts to his firms. In her plea, Harrison admitted receiving a Cadillac Escalade from Bloom in 2004 and more than $300,000, some of which she used to make home improvements. She faces a stautory maximum of 20 years in prison when she is sentenced on November 19. Bloom is currently serving a 46 month prison sentence; his principal co-conspirator Robert Stein was sentenced to 9 years in prison (DOJ).

Former Refco Chairman and CEO Phillip Bennett, who was sentenced to 16 years in prison on July 3, will appeal his sentence — not his conviction — to the the US Court of Appeals for the Second Circuit. Bennett pleaded guilty in February to conspiracy, wire fraud, bank fraud, money laundering and making false SEC filings in connection with the October 2005 collapse of the company which caused investor and partner losses estimated at $2.4 billion (Reuters).

A grand jury in Washington has indicted US Sen. Ted Stevens (R-Alaska) on seven counts of making false statements on his Senate financial disclosure forms between 1999 and 2006. The indictment (.pdf) alleges that Stevens actively schemed for years to conceal over $250,000 in gifts he received from VECO Corporation, its CEO Bill Allen and two other unnamed parties. VECO is a now-defunct oilfield services company that was once the Alaska’s largest. Allen and former VP Rick Smith pleaded guilty to corruption charges in 2007 and have been cooperating with prosecutors (Bloomberg, McClatchy). We’ve covered other VECO-related corruption cases here.

Federal prosecutors in Miami on Friday announced that Dasford Demetrius of Broward County (home of the dimpled chad) has been indicted on 46 counts of mail fraud in connection with a “work-at-home” scheme he promoted. Demetrius allegedly offered customers opportunities to make money by mailing promotional materials from home, requiring upfront fees from $40 to as much as $299 and “guaranteeing” payments of $30 per package mailed.The indictment alleges that he collected over $1.5 million in upfront fees and never compensated any of the participants. The indictment also states that Demetrius has a history of engaged in fraudulent work-at-home schemes and has twice before been under a Consent Order with the USPS, promising to cease and desist (Sun-Sentinel, DOJ)

Attorney Paul Arparo of Hartford, Connecticut pleaded guilty on Thursday before US District Judge Alvin Thompson in Hartford to one count of conspiracy to commit financial institution bribery and one count of bank fraud in connection with a bid rigging scheme involving the sale of bank loans. Arparo admitted that between 2001 and 2007 he conspired with Kevin O’Keefe,a vice president of Fleet Bank (later acquired by Bank of America) and an unnamed real estate developer to rig the bidding process on portfolios of distressed loans that Fleet offered for sale. O’Keefe, who pleaded guilty in June, supplied Arparo and the developer with inside information and gave false information to other bidders so that the developer could submit the winning bid on the properties. Arparo acknowledged that he and O’Keefe shared $1.4 million in payoffs from the developer. Aparo faces a statutory maximum of 35 years in prison. His sentencing is scheduled for October 14 (Newsday, DOJ).

Jeremiah Mondello of Eugene, Oregon was sentenced to four years in prison on Wednesday by US District Judge Ann Aiken in Portland for criminal copyright infringement, aggravated identity theft and mail fraud. Mondello pleaded guilty to the charges in May. He admitted using computer viruses to install keystroke logging software which he used to steal financial data from at least 40 victims. He then used the stolen data to set up multiple bank, eBay and PayPal accounts under which he sold counterfeited software between 2005 and 2007. He made about $400,000 but the loss to the copyright owners was an estimated $1.2 million (Wired News, DOJ).

Deborah Lee Stinson and her son Mark Alan Stinson, both of Dallas, were indicted on Wednesday on counts of conspiracy to commit wire fraud and structuring transactions to evade reporting requirements. Deborah Stinson has been a support employee with the FBI in Dallas for 20 years. The charges arose from an unusual circumstance: Mark Stinson shot and killed a man in a home invasion last year. He was cleared, but investigators noticed a number of expensive vehicles at his house which were all titled to his mother. The indictment alleges that Mark Stinson gave his mother large sums of cash to set her up as a straw buyer of the vehicles and as a straw borrower on car loans which were based on falsified applications. Both Stinsons made their initial court appearance on Thursday and pleaded not guilty. There’s no word yet on where the large sums of cash came from (Dallas Morning News, DOJ).

Staten Island dentist Terrance Stradford was sentenced on July 21 to 10 years in prison by US District Judge Freda Wolfson in Trenton, New Jersey in connection with loan frauds totaling $2.76 million. A jury convicted Stradford in September 2007 on 24 counts including conspiracy, tax evasion, wire fraud and money laundering. Stradford obtained mortgages from two lenders totaling $1.36 million on a property in Berlin Township, New Jersey worth about 25% of that amount and already encumbered by first and second mortgages, by falsifying deed records to show that there were no other mortgages and having the proceeds wired to a title company he had established to carry out the scheme. He was assisted by Christina Hachadoorian, who pleaded guilty and testified against him; she is to be sentenced in November. The defendants spent the proceeds on themselves, including the purchase of a 46 foot yacht. Judge Wolfson also held Stradford responsible for $1.4 million in other fraudulent loan transactions (Courier-Post, DOJ).

In an interview published on Thursday by WHNT in Huntsville, former Alabama Governor Don Siegelman attacked Karl Rove for his defiance of the House Judiciary Committee’s subpoena ordering him to appear and accused Rove of weaseling in his written response to the committee: “Even his written non-answers were not under oath and clearly evasive.” Siegelman also announced the launch of a petition drive located on his website urging Congress to find Rove in contempt.

Sentencing dates for five former executives of National Century Financial Enterprises, previously scheduled for July 21-23 (earlier), have been rescheduled. Donald Ayers and Randolph Speer now will be sentenced on August 6 while Roger Faulkenberry and James Dierker will be sentenced on August 7. A new date has not yet been set for Jon Beacham,who pleaded guilty in July 2007 and testified against the others at their trial earlier this year (Columbus Dispatch).

Cecelia Grimes of Parkesburg, Pennsylvania, a former defense lobbyist and close friend of former US Rep. Curt Weldon (R-Pa.) pleaded guilty on Friday before US District Judge Henry Kennedy in Washington to a one-count information charging her with destruction of evidence. Grimes was served with grand jury subpoenas by the FBI in 2006 seeking documents about her association with Weldon. She admitted destroying the documents soon afterwards. She is now cooperating with prosecutors in the ongoing investigation of Weldon. Sentencing has been scheduled for January 23, 2009. She is expected to receive a sentence of 10 to 16 months in prison (Philadelphia Inquirer, DOJ).

Ken Silverstein at Harper’s has more here on the activities of Weldon and his daughter Karen, including a link to the LA Times article he co-authored in 2004 which prompted the investigation.

A federal jury in Greenbelt, Maryland on Thursday convicted former Prince George’s County Schools Superintendent Andre Hornsby on six of the 22 public corruption-related counts he faced: three counts of honest service wire fraud and one count each of evidence tampering, witness tampering and obstruction of justice. Hornsby was acquitted on one wire fraud count and one attempted witness tampering count; jurors were deadlocked on the remaining counts. An earlier trial last year ended in a hung jury.

Hornsby, who resigned in 2005 when the allegations arose after a Baltimore Sun investigation, was accused in two different schemes of illegally steering district contracts to favored parties in exchange for kickbacks. One party was the company operated by Hornsby’s now ex-girlfriend Sienna Owens, who pleaded guilty to impeding IRS laws and testified against him; she is awaiting sentencing. The other party was longtime business associate Cynthia Joffrion. The three wire fraud counts on which he was convicted all relate to Owens’ firm. Hornsby faces a statutory maximum of 90 years in prison, although guidelines will call for considerably less time. US District Judge Peter Messitte scheduled sentencing for October 20 (Baltimore Sun, WaPo).

“Spam King” Eddie Davidson, who escaped from a minimum security federal prison in Florence, Colorado on Sunday (earlier), shot and killed his wife and three-year-old daughter on Thursday morning and then killed himself. Their bodies were found at their former home in Bennett, east of Denver, in and beside the same vehicle his wife was driving Sunday night when he jumped in and forced her to drive off. The current homeowners were at work. His 14-year-old daughter escaped after being grazed in the neck and his seven-month-old son was found unharmed in the back seat.

USA Troy Eid said “What a nightmare, and such a coward. Davidson imposed the death penalty on family members for his own crime.” Davidson was sentenced to 21 months in prison on April 28 and began serving his sentence in late May (Rocky Mountain News, Denver Post).

Provost Umphrey of Beaumont, Texas, the law firm which has picked up some of the clients from the now-disqualifed Scruggs Katrina group in the Shows v. State Farm RICO lawsuit, has filed a Motion for Leave to discuss and consider representing the Rigsby sisters in ex rel. Rigsby, the qui tam case. They also ask for an extension of the deadline for the Rigsbys to obtain representation. Oddly, the motion was filed in connection with a different civil action, Alford v. State Farm, yet it seeks relief for Provost Umphrey, not Alford. Attorneys for State Farm quickly filed a notice of intent to respond in opposition to the firm’s attempt to represent the Rigsbys, but will not oppose giving the Rigsbys more time to obtain new counsel The Sun Herald story has links to both filings.

At a House Judiciary Committee hearing on Wednesday, AG Michael Mukasey said that results of the OPR probe into the prosecution of former Alabama governor Don Siegelman will be released to Congress, and depending on the results, may be released to the general public (Huntsville Times/AP).

During the hearing it was revealed that purported emails between jurors during the trial were determined to be false but that US District Judge Mark Fuller failed to notify defense attorneys (Birmingham News).

Karl Rove on Wednesday responded in writing to questions posed by HJC Republicans, denying that he had anything to do with the Siegelman prosecution, either directly or indirectly (NY Times, LA Times).

The Rocky Mountain News reported Wednesday that “Spam King” Eddie Davidson escaped from a minimum security prison in Colorado on Sunday. Davidson was sentenced in late April to 21 months in prison (earlier).

In Seattle on Tuesday, US District Judge Marsha Pechman sentenced “Spam King” Robert Soloway to 47 months in prison for violating the CAN-SPAM act. Soloway pleaded guilty in March to email fraud, mail fraud and tax evasion (Seattle Post-Intelligencer, DOJ).

And let’s not forget Adam Vitale, who was sentenced to 30 months in prison last week for spamming (earlier). Investigators and prosecutors crowned him the “Spam King” too.

Somebody stop the coronations, please! Not every spammer can be the Spam King. I suggest using Spam Dauphin, Spam Crown Prince or Spam Duke of Earl.

The Bureau of Prisons has ordered Dickie Scruggs to report to the low security federal prison in Ashland, Kentucky on August 4. Zach Scruggs has been ordered to report to the minimum security federal prison camp in Pensacola, Florida on August 15. Co-defendant Sid Backstrom was assigned earlier to the low security federal prison in Forest City, Arkansas, as he had requested; he reports on August 4. (Sun Herald).

Now that legal proceedings have concluded, disbarment of the three defendants is imminent (Sun Herald). The Mississippi Bar’s earlier motions to suspend were never acted upon, possibly because of the Mississippi Supreme Court’s limited schedule after sprinkler flooding damaged the Court’s offices in May.

Scott Horton at Harper’s interviews former USA David Iglesias about the DOJ scandal and what happened in New Mexico when he was pressured to bring voter fraud prosecutions he believed he couldn’t win. It’s worth noting that Iglesias does not include the case of Paul Minor when discussing possible politically motivated prosecutions. He brings up the cases of Don Siegelman, Cyril Wecht and Wisconsin employee Georgia Thompson, but says, “I am not aware of even the allegation of a ‘Faustian bargain’ with the remaining 81 US Attorneys.”

A federal grand jury in Richmond, Virginia on July 10 returned a superseding indictment in the case of Edward Okun of Miami, who was indicted in March (earlier) in connection with the theft of $132 million in client funds held in trust by 1031 Tax Group (1031TG), his qualified intermediary company. Okun allegedly converted the funds for his personal and business use, including the purchase of a $6.7 million house and a $15.5 million yacht. There are allegedly 577 victims in the case. The 27 count superseding indictment charges Okun and Lara Coleman of Richmond, his Chief Operating Officer,with conspiracy wire fraud, mail fraud, money laundering and bulk cash smuggling and forfeiture. Okun also faces one count of making false statements. Coleman made her initial appearance in the case on July 10. Both Okun and Coleman pleaded not guilty on July 18 (Richmond Times-Dispatch, DOJ).

Indadeeq Omar of Eden Prairie, Minnesota was sentenced on July 17 in Minneapolis to 72 months in prison for defrauding Medica Health Plans out of an estimated $1.7 million in medical assistance payments from 2001 to 2004. Omar, an immigrant from a prominent Somali family, owned Global Interpreter Corp., which contracted with Medica to provide translation services to Medica members who needed it when receiving care. These claims were processed by Medica on behalf of the Medicaid public health care benefit program. A jury convicted Omar in December 2007 on 46 counts of health care fraud, money laundering and related charges for submitting thousands of bills for translation services that were never rendered. Tou Chaiker Vang, a Medica employee, fed inside information to Omar which enabled phony billings to match clinic visits by plan members. Vang pleaded guilty to conspiracy and testified against Omar; he was sentenced in April to one year and one day in prison. Omar’s husband, Mohamed Essa was indicted along with Omar but he fled the US. He was captured in April in South Africa and has since been returned to face trial (Star Tribune).

Federal prosecutors in Philadelphia on Monday announced the filing of a one count information charging former KYW-TV news anchor Larry Mendte with intentionally accessing a protected computer without authorization. Mendte, who was fired last month after the FBI raided his house, is accused of hacking into former co-anchor Alycia Lane’s email accounts for over 2 years, including 537 times between January 1 and May 26, 2008, and leaking her personal information to a Philadelphia Daily News gossip columnist. He apparently accessed the account by installing a keystroke logger, although that is not specified in the information. The emails included attorney-client communications relating to criminal and civil litigation involving Lane. A hearing has been set for August 22, at which Mendte is expected to plead guilty. He faces a statutory maximum of five years in prison (Philadelphia Inquirer, DOJ Press Release, Information).

Adam Vitale of Brooklyn was sentenced to 30 months in prison last Tuesday by US District Judge Denny Chin in Manhattan for his role in a scheme that sent 1.2 million spam emails to AOL subscribers in one six-day period in 2005. Vitale was listed as a professional spammer on an industry watchlist operated by Spamhaus. He was caught because the spamming was done on behalf of a confidential informant. Vitale and co-defendant Todd Moeller, who was sentenced last November to 27 months in prison, used multiple servers to bypass AOL’s spam filters, indicating that they may have been operating a botnet. Ironically, the spam was for a computer security product. Vitale pleaded guilty in June 2007 to one count of conspiracy and two counts related to the illegal spamming (Reuters via Yahoo, DOJ).

In a unanimous decision published on Friday, a three-judge panel of the US Court of Appeals for the Second Circuit upheld (.pdf) the acquittal of David Finnerty, a former NYSE specialist trader at Fleet Specialist, now Banc of America Specialist. A jury in the Southern District of New York in October 2006 convicted Finnerty on three counts of securities fraud in a scheme known as interpositioning. But in February 2007 US District Judge Denny Chin acquitted Finnerty, holding that “the government did not … establish that Finnerty’s customers were misled or defrauded or otherwise deceived.” In upholding Chin’s ruling, the appellate panel acknowledged that Finnerty had violated NYSE rules but held that the violation “does not bespeak criminally fraudulent conduct within the context of the securities laws,” and agreed that the government failed to prove that Finnerty had engaged in deceptive conduct or misled his customers (Reuters).

“It is not my practice to accept guilty pleas from people who are not guilty.” So said US District Judge Saundra Armstrong, according to a transcript of a June 10 hearing in Oakland in the case of Chi Yang, as reported Friday by Dan Levine in the Cal Law Recorder (via Law.com). Yang and his biotech company SynPep were indicted in 2006 for allegedly falsifying information about their products. Although Yang was about to plead to making a false statement rather than fraud, Armstrong didn’t believe the government had a case against Yang after questioning him. The parties have not been able to reach a new plea agreement and Armstrong has now set a trial date of November 3. The rejected plea called for prison time for Yang but if the case were to go to a jury, the potential consequences for Yang could be far greater.

US District Judge Danny Reeves has set October 14 as a retrial date for William Gallion and Shirley Cunningham, Jr., two of the three attorneys who were tried for conspiracy to commit wire fraud against class action members in a lawsuit against fen-phen maker American Home Products. The trial is likely to be delayed due to defense attorneys’ commitments to other cases. The third defendant, Melbourne Mills, Jr., was acquitted on July 1 but US District Judge William Bertelsman declared a mistrial on July with jurors apparently deadlocked 10-2 in favor of acquitting Gallion and Cunningham. Bertelsman has since recused himself. A superseding indictment will be forthcoming which will omit Mills, and AUSA Laura Voorhees told Judge Reeves that additional charges may be brought against Gallion and Cunningham. Voorhees later said that there will be new calculations of the amounts the defendants allegedly took from their clients. Unable to win a conviction on one set of allegations, the USAO plans to move the goal posts (Lexington Herald-Leader).

The US Court of Appeals for the Third Circuit had scheduled oral arguments for July 25 in the appeal of former Allegheny County Coroner Cyril Wecht but lead prosecutor Stephen Stallings has since departed. The Pittsburgh Post-Gazette now reports that oral arguments are set for August 4.

Rhonda Harris of Wagoner, Oklahoma on Tuesday was sentenced to 168 months in prison by US District Judge Ronald A. White in Muskogee for embezzling millions from bank customers of Arvest Bank and its predecessors over a 25 year period. Harris pleaded guilty in March 2008 to one count of embezzlement by a bank officer and one count of money laundering; she also received 120 months on the money laundering count, to be served concurrently. From the sentencing press release:

On October 23, 2006, a bank customer went to the bank branch in Tulsa to cash a CD she had purchased at the Wagoner branch. Tulsa branch officers were unable to find evidence that the CD existed. The officials researched other accounts and determined that several accounts had been compromised.

An executive Vice President immediately confronted the defendant. She confessed that she had been stealing from the bank for 25 years. She was quickly removed from the bank and interviewed that day. She gave a partial list of affected customers, accounts, and amounts.

82 customers suffered losses and about $5.6 million has been paid to them by the bank and Chubb Insurance. That amount includes interest that would have been earned had the money not been stolen (The Oklahoman, DOJ).

In Anderson, South Carolina on Wednesday, Daryl Batts pleaded guilty before US District Judge G. Ross Anderson, Jr. to a two-count information charging him with securities fraud and mail fraud. Batts, owner of Comprehensive Financial Solutions Inc. in Easley, admitted defrauding about 150 investors of about $5 million in what prosecutors described as a classic Ponzi scheme. Batts took in about $6 million over a 6 year period to be invested in securities and life insurance products but never invested any of the money, keeping investors at bay with falsified statements and eventually paying out about $1 million to old investors with new investors’ money. Much of the remainder was converted to personal use, although as much as $2-3 million may be recoverable. Batts faces a statutory maximum of 50 years in prison; a sentencing date will be set later (Greenville News, DOJ).

Mark Turkcan, former president and CEO of St. Louis’ First Bank Mortgage, was indicted last Thursday by a federal grand jury on 11 counts in connection with a scheme that allegedly cost its parent First Bank an estimated $35 million. Turkcan faces eight counts of wire fraud and one count each of misapplication of bank money, making false bank entries and causing the filing of a false annual report. The scheme allegedly began as far back as 1987 when Turkcan worked for a bank later purchased by First Bank. He allegedly lost $5 million on unauthorized mortgage-backed securities investments, hid the losses, and spent the next 20-plus years doing more of the same in order to recoup his losses. Instead, the losses increased to about $35 million (St. Louis Post-Dispatch, DOJ).

In Washington on Friday, US District Court Judge Colleen Kotar-Kotelly sentenced Martin McLaren of Bethesda, Maryland to 37 months in prison for making false statements in relation to health care matters. McLaren, an anesthesiologist who owned the Pain Management Center based in Hyattsville, admitted to receiving at least $1.75 million as a result of fraudulent billings submitted to Medicare, Medicaid and private carriers between 2000 and 2006 (Washington Times, DOJ).

Ryan McCourt and Kenneth Hartley, both former managers for McCourt Construction Company, last Thursday pleaded guilty before US District Judge Joseph Tauro in Boston to a single-count information charging conspiracy to commit highway project fraud by making false statements regarding the cost of work performed on a federal highway project. Ryan McCourt’s plea agreement had been announced in February at the time McCourt Construction pleaded guilty (earlier). Both men admitted taking part in an overbilling scheme on the I-93 Tip O’Neill Tunnel project, in which subcontractors charged journeyman labor rates for work actually done by apprentices. Judge Tauro scheduled sentencing for October 1; Ryan McCourt and Hartley face a statutory maximum of five years in prison. McCourt Construction’s sentencing date is August 22 (Boston Herald, DOJ).

US District Judge John E. Jones III on Friday refused to dismiss the tax fraud and conspiracy indictment in the Middle District of Pennsylvania against Adelphia Communications founder and former CEO John Rigas and his son, former Adelphia CFO Timothy Rigas. In this case, they are accused of evading about $300 million in personal income taxes. Both men were convicted of securities fraud, bank fraud and conspiracy in the Southern District of New York and are currently serving sentences of 12 and 17 years, respectively (earlier).The Rigases sought dismissal on grounds of double jeopardy and that their acquittal on one wire fraud count in the New York case meant that they didn’t convert Adelphia funds for personal use. But Jones ruled that the Pennsylvania case essentially covers separate offenses and that the acquittal on the wire fraud count did not mean the jury concluded they didn’t defraud Adelphia (Harrisburg Patriot-News).

Atul Malhotra of Santa Barbara, California, a former Hewlett-Packard vice president who had previously worked for IBM, pleaded guilty on Friday to one count of theft of trade secrets before US District Court Judge Jeremy Fogel in San Jose. Malhoutra admitted that in March 2006, while he was a sales director at IBM, he requested confidential documents containing trade secrets about pricing and product costs; in July 2006, two months after joining HP, he passed the documents to two senior vice presidents at HP. Malhotra faces a statutory maximum of 10 years in prison; sentencing is scheduled for October 9. IBM and HP fully cooperated in the investigation (Reuters via IHT, DOJ).

Attorney Paul Seltzer on Monday became the final Milberg Weiss (now Milberg LLP) defendant to plead guilty in the racketeering and money laundering case against the firm and its former principals. Seltzer pleaded guilty before US District Judge John Walter in Los Angeles to one count of corruptly endeavoring to obstruct the IRS code. He admitted accepting almost $50,000 from the firm and failing to tell the IRS that he transferred $19,000 of it to Seymour Lazar, the convicted dummy plaintiff in many of Milberg’s class action shakedowns suits. Sentencing is scheduled for November 3. Seltzer faces a statutory maximum of three years in prison but prosecutors will recommend probation (AP/San Jose Mercury News).

The trial of former National Century Financial Enterprises CEO Lance Poulsen on securities fraud and related charges has been postponed. It was scheduled to begin August 4 but US District Judge Algenon Marbley rescheduled the start date to October 1. He granted the delay because Poulson’s attorneys need more time to review 40 boxes of evidence they have recently received from the government. Poulsen was to have been tried with five other executives, all of whom were convicted on March 13, but his trial was delayed because he was indicted for witness tampering; he and an associate were convicted on all those counts on March 26. The delay pushes back the fraud trial of a seventh National Century executive, James Happ, from October 1 to December 1 (Columbus Dispatch).

Emperors Club VIP booking agent Tanya Hollander will become the fourth and final defendant connected with the club to plead guilty in the prostitution ring case that ensnared Eliot Spitzer. Although she pleaded not guilty in US District Court in Manhattan on Monday, her attorney said she would plead guilty to to one count of conspiracy to violate the federal Travel Act at a hearing scheduled for August 25. The other three defendants, Mark Brener, Cecil “Katie” Suwal and Temeka Lewis, pleaded guilty to money laundering conspiracy in addition to prostitution-related conspiracy, indicating that Hollander is likely to receive a lighter sentence. There’s still no word from prosecutors about any possible charges against Spitzer (Reuters).

In Alexandria, Virginia on Friday, US District Judge Leonie Brinkema sentenced Gregg Bergersen of Alexandria to 57 months in prison for conspiracy to disclose national defense information to persons not entitled to receive it. Bergersen, a former weapons systems policy analyst at an agency within the Department of Defense who had a top-secret clearance, pleaded guilty on March 31. He admitted passing classified national defense information about Taiwan to a Taiwanese-born US citizen, Tai Shen Kuo of New Orleans. He was unaware that Kuo was passing the information to Yu Xin Kang, also of New Orleans, and that she was passing the information to an unregistered agent of the People’s Republic of China. Kuo and Kang pleaded guilty in May and will be sentenced in August (Reuters via WaPo, DOJ).

All in the family: Chad Wickline and his father Dan Wickline, both of Pickerington, Ohio, pleaded guilty on Thursday in connection with a so-called debt-elimination service they ran. The pleas came in the middle of their trial before US District Judge Algenon Marbley in Columbus. Chad Wickline pleaded guilty to one count of mail fraud and one count of conspiracy to commit money laundering; Dan Wickline pleaded guilty only to the conspiracy count. The Wicklines’ company, Liberty Resources, advertised a “100% legal” and “100% successful” plan to eliminate credit card debts, charging a $7,500 fee to reveal the “little-known fact that federally insured banks really don’t have the authority to issue credit.” And about 400 idiots people actually fell for it, going further in debt, dmaging their credit and in some cases going into bankruptcy. Sentencing will be scheduled later (Columbus Dispatch, DOJ).

Following the June 30 guilty plea of Anthony Tesvich, a second former Home Depot employee has pleaded guilty in the kickback scheme. James P. Robinson of on Friday pleaded guilty to one count of conspiracy to commit wire fraud and two counts of tax evasion before US District Judge Richard Story in Atlanta. Robinson admitted taking kickbacks from foreign flooring suppliers who wanted to do business with Home Depot. The tax counts include $765,000 in unreported income from 2005 and 2006. Sentencing is scheduled for October 14 (Atlanta Journal-Constitution, DOJ).

“Justice should be dispensed just as surely to the powerful and well-connected as anyone else.” Guest columnist Craig Ziemba has an excellent op-ed in The Meridian Star.

Alex Latifi, the Iranian-born US citizen whose Huntsville, Alabama defense contracting firm Axion Corporation was essentially destroyed because of an incompetent and possibly malicious prosecution by USA Alice Martin, has filed a formal complaint with the OPR alleging misconduct by Martin. Latifi and Axion were awarded legal fees and other costs in an April ruling by US District Judge Inge Johnson. Latifi’s attorney Henry Frohsin said the DOJ has told him that the investigation has begun (Birmingham News).

NPR reports that Deputy Special Counsel James Byrne, the number two man in the US Office of Special Counsel behind controversial Special Counsel Scott Bloch, announced his resignation on Thursday. The resignation was said to be “in protest over the way the office has been run” under Bloch, who is currently under federal investigation. Our earlier Bloch coverage: 1 2 3.

Being Mary Beth Buchanan’s sock puppet must be tiring. Stephen Stallings, the lead prosecutor in the severely misguided public corruption case against former Allegheny County Coroner Cyril Wecht, has left the Western District of Pennsylvania to go into private practice. He says it’s not about his failure to convict Wecht (Pittsburgh Tribune-Review).

78-year-old John Cowdery, a Republican state sentaor from Anchorage and the oldest member of the Alaska legislature, is the latest politician to be indicted in the state’s ongoing public corruption investigation. And once again, it involves officials of VECO Corporation, the now-defunct oilfield services company that was once Alaska’s largest. A federal grand jury on Wednesday indicted Cowdery on one count of bribery and one count of conspiracy. The indictment alleges that Cowdery and his co-conspirators, including VECO CEO Bill Allen and VP Richard Smith, “corruptly offered and agreed to give financial benefits to another state legislator (State Senator A) to influence and reward State Senator A in exchange for State Senator A agreeing to perform official acts as a member of the Alaska State Legislature.” The unnamed state senator was allegedly offered $25,000 in 2006 to vote in favor of oil and gas legislation favored by VECO. The $25,000 was allegedly mischaracterized as campaign contributions. Cowdery’s attorney has identified the mystery senator as Donny Olson, a Democrat from Nome who was then running for lieutenant governor (Anchorage Daily News, DOJ).

Allen and Smith have already pleaded guilty in the investigation and are cooperating with prosecutors. They have implicated US Sen. Ted Stevens and his son, former Alaska state Senate President Ben Stevens; both have denied wrongdoing. US Rep. Don Young is also under investigation.

Mark Lay, chief executive and founder and CEO of now-defunct MDL Capital Management of Pittsburgh, was sentenced on Tuesday to 12 years in prison by US District Judge David Dowd in Akron. A jury convicted Lay last October of investment advisory fraud, two counts of mail fraud and conspiracy. The charges arose from his allegedly unauthorized investment of $216 million on behalf of the Ohio Bureau Of Workers Compensation.The bureau was the only investor in a highly leveraged hedge fund which failed. Lay contended there was no criminal intent. He was taken into custody immediately following sentencing. It’s the latest conviction in the Ohio corruption investigation that started with former Republican fundraiser Tom Noe (Columbus Bizjournal, DOJ).

Dr.William W. Hampton of Orange County was sentenced to 10 years in prison on Monday by US District Judge Audrey Collins in Los Angeles for his involvement in a scheme where patients were recruited for unnecessary surgery for “sweaty palm syndrome” and other bogus procedures. He was also ordered to pay nearly $2.5 million restitution to insurance companies he defrauded, although the total amount of the fraud was alleged to be over $9 million. A jury convicted Hampton on one count of health fraud last November, acquitted him on another and deadlocked on other counts which were later dropped by prosecutors. In the scheme, marketers working for Hampton and another doctor would recruit patients for the surgeries in exchange for cash or discounts on cosmetic surgeries. The other doctor, Mamdouh Bahna, pleaded guilty to health care fraud last year and is serving a 58 month prison sentence (OC Register, DOJ).

Hampton, two other doctors and 16 other defendants including marketers and hospital administrators have been indicted on state charges alleging over $150 million in unnecessary surgeries (Orange County DA, KABC video).

CNN.com reports here on Karl Rove’s refusal to appear before the House Judiciary Committee in response to a subpoena. The subpoena was issued in connection with the Committee’s investigation of alleged political firings and prosecutions in the Department of Justice. The striking thing about this latest episode of Bush Administration arrogance is not that Rove is claiming executive privilege; it is that Rove refused to even appear before the House Juiciary Committee. Under law, when a witness claims a privilege not to testify before a judicial or legislative body he still, unless excused by the entity issuing the subpoena or a court of law, must appear and invoke whatever privilege he is claiming on a question by question basis. Rove and his attorney Robert Luskin have rejected this approach. The only question left is whether Judiciary Committee Chairman John Conyers and the Democratic majority will have the guts to hold Rove in contempt. Don’t hold your breath.

Karen Baer of Westminster, Maryland on Monday pleaded guilty to bank fraud before US District Judge Andre M. Davis in Baltimore. Baer was a teller and teller supervisor from 1998 to 2007 at PNC Bank and its predecessors, Westminster Union Bank and Mercantile Bank. After PNC bought Mercantile last September, auditors uncovered a long running scheme in which Baer allegedly stole from the branch where she worked, $10,000 at a time. In the plea agreement, she admits to stealing “at least $400,000″ but the alleged total amount is $1.05 million. Baer has agreed to asset forfeiture; she faces a statutory maximum of 30 years in prison. Sentencing is scheduled for October 3 (DOJ).

Ronald Peteka, a former Morgan Stanley client service representative, pleaded guilty on Wednesday in US District court in Manhattan to possessing stolen proprietary information about the company’s hedge fund clients. Peteka is the co-conspirator referred to as CC-1 in the indictment of Ira Chilowitz, an IT consultant who pleaded guilty last year to stealing and transporting proprietary data and other counts. He and Peteka planned to use the stolen data to start their own firm (Reuters).

Abraham Lesnik of Valley Village, California has pleaded guilty to unauthorized possession of defense information for taking documents classified as secret and top secret from his office. Lesnik, a former engineer at a Boeing facility in El Segundo, pleaded guilty on July 1 before US District Judge Florence-Marie Cooper in Los Angeles. He was charged on June 16, nearly two years after the investigation into his activities began. Lesnik, who held a Top Secret DOD security clearance, admitted repeatedly downloading the classified documents to a USB thumb drive so he could work on them at home. He also admitted retaining 11 documents including one top secret document. Judge Cooper scheduled sentencing for October 6. Lesnik faces a statutory maximum often years in prison. but the plea agreement calls for no more than five years (LA Times, DOJ).

Gustavo Smith of Miami, now a fugitive, was sentenced on July 2 to 130 months in prison by US District Judge Marcia Cooke in Miami. Smith was convicted by a jury in April on 17 counts including conspiracy, seven counts of health care fraud, seven counts of false claims, one count of money laundering conspiracy and one count of money laundering. His Miami-based durable medical equipment companies, Medstar Services and Orthotics Fitters, billed $4.6 million in claims to Medicare from 2005 to 2007 using names and Medicare numbers of patients who never heard of him and Medicare provider numbers of doctors who never heard of him and never prescribed the equipment. Smith was allowed bond with home confinement and electronic monitoring, but he fled the US on June 14 (Miami Herald, DOJ).