Articles by Dave Westheimer

Former CIA executive director Kyle “Dusty” Foggo was sentenced to 37 months in prison on Thursday by US District Judge James Cacheris in Alexandria. Foggo pleaded guilty in September to one count of honest services wire fraud in connection with the Brent Wilkes case (earlier). The sentence was the maximum allowable under his plea agreement (NY Times).

Timothy Balducci and Steve Patterson were each sentenced to 24 months in prison on Friday by Senior US District Judge Neal Biggers in Oxford for their roles in the first Dickie Scruggs case involving the attempted bribery of Judge Henry Lackey. In both cases it was a downward departure from guidelines. Folo reports the real news here: AUSA Bob Norman needs both men to testify in person on March 23 before a grand jury in the ongoing investigation. Both men were ordered to report to prison on March 25 (Daily Journal, Clarion-Ledger).

Here (h/t folo). One count of conspiracy, one count of honest service mail fraud, two counts of mail fraud and one count of obstruction of justice. The only other name on the indictment was Dickie Scruggs, whose named was removed in connection with his plea on Tuesday. However, count one names four other co-conspirators: Ed Peters, Joey Langston, Tim Balducci and Steve Patterson. Langston has already been sentenced to prison and Ed Peters has surrendered his law license and forfeited his proceeds, while Balducci and Patterson will be sentenced tomorrow for their roles in Scruggs I.

The indictment is still sealed this morning but Judge Bobby DeLaughter was arraigned before US Magistrate Judge S. Allan Alexander in Oxford and pleaded not guilty to all charges. We do know that it’s a five-count indictment, Daily Journal says it will be unsealed later today. Tom Freeland at folo reports that DeLaughter was in leg irons and handcuffs. More: Clarion-Ledger.

Dickie Scruggs pleaded guilty yesterday in US District Court in Aberdeen to a one count information charging him with honest services mail fraud. He was immediately sentenced to seven years in prison by US District Judge Glen Davidson. The sentence will run concurrently with the five year sentence he is already serving in connection with Scruggs I.

It was announced that his name had been removed from the list of names in a sealed indictment, confirming rumors that a sealed indictment exists, possibly containing more than just Judge Bobby DeLaughter’s name. USA Jim Greenlee afterwards said it would be unsealed shortly.

Scruggs has become a cooperating witness, and Tom Freeland at folo quotes AUSA Bob Norman: “His cooperation has opened several doors we need to investigate.” Could one or more of them lead to Washington?

From the courtroom: Tom Freeland at folo, Alan Lange at Y’all Politics. Also see: Daily Journal, Clarion Ledger.

The Clarion Ledger reports that he’ll be appearing on Tuesday in US District Court in Oxford to enter a guilty plea in the ongoing second case (h/t folo). He’s apparently en route from prison in the custody of the US Marshals Service. Meanwhile, Scruggs I defendants Tim Balducci and Steve Patterson will be sentenced next Friday.

With Joey Langston sentenced, the other shoe is about to drop in Scruggs II. On Tuesday, WLBT reported that former Hinds County DA Ed Peters has surrendered his law license. Tuesday evening, NMC at folo posted (.pdf) an order from US Magistrate Judge S. Allan Alexander seizing $425,000 from Peters; the funds are already in the possession of the United States Marshals Service:

The court is satisfied that based on the Verified Complaint For Forfeiture In Rem, as well as the Verification of the Complaint by Samuel D. Wright, Assistant United States Attorney for the Northern District of Mississippi, United States Department of Justice, filed with this court on December 31, 2008, there is probable cause to believe that the Defendant property is subject to forfeiture pursuant to 18 U.S.C. § 981(a)(1)(c) because it is property that constitutes or is derived from proceeds traceable to violations of 18 U.S.C. § 1343 (Wire Fraud), which constitutes a “specified unlawful activity” by virtue of 18 U.S.C. § 1956 (c)(7)(A) and 18 U.S.C. § 1961 (1), collectively.

The Daily Journal has more here on the underlying complaint. Nothing has been announced yet, but it’s apparent that Peters has reached a plea agreement with federal prosecutors. This means that the hammer is about to drop on Judge Bobby DeLaughter and (again) on Dickie Scruggs. Will Scruggs II also ensnare Trent Lott and the mysterious P.L. Blake? Stay tuned.

Chief US District Judge Michael Mills on Tuesday sentenced Joey Langston to 36 months in prison for his role in the public corruption scandal now known as “Scruggs II” (Daily Journal, Clarion-Ledger). Langston pleaded guilty in January to a one-count information charging him with bribing Judge Bobby DeLaughter. He received the maximum sentence allowable under his plea agreement despite a a motion for downward departure filed by prosecutors last month citing his extensive cooperation. The implications for Bobby DeLaughter and Ed Peters (not to mention Dickie Scruggs) are ominous.

More: the Daily Journal hints at upcoming Scruggs II indictments, NMC’s courtroom commentary at folo, sentencing transcript (.pdf).

Giving Thanks by Jennifer James in the Los Angeles Times.

If only Beltway politicians could understand as well as a child!

In Sherman, Texas on Tuesday, US District Judge Richard Schell sentenced James Sandlin of Sherman to three years in prison in a bank fraud case. A jury convicted Sandlin in June on two counts of submitting a false statement to a federally insured financial institution (earlier); the indictment charged that he failed to disclose a $996,000 debt on financial statements he submitted to a Sherman bank (DOJ, AP).

Sandlin is former business associate of US Rep. Rick Renzi (R-Ariz.) and was indicted with Renzi in February in a different case (earlier).

UD District Judge Peter Messitte on Tuesday sentenced former Prince George’s County Schools Superintendent Andre Hornsby to six years in prison for illegally steering district contracts to LeapFrog Enterprises, a company run by his now ex-girlfriend, in exchange for kickbacks. Hornsby was convicted in July 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 (earlier). Although the DOJ press release describes a second scheme in detail, the three wire fraud counts on which he was convicted all relate to the LeapFrog allegations (Baltimore Examiner).

US District Judge Emmet Sullivan on Wednesday scheduled a hearing for next Monday to consider a request by attorneys for Sen. Ted Stevens to question prosecution witness Dave Anderson about the letter he sent to the court and lawyers for both sides (earlier here and here). Anderson, a former VECO employee and nephew of former VECO CEO Bill Allen, is is seking to “clarify” his testimony at trial that he had not been offered immunity in exchange for his testimony against Stevens (WaPo).

Bloomberg reports that former NatWest investment banker David Bermingham was flown to the UK on November 21 to finish serving his 37 month prison sentence for wire fraud in connection with a scheme devised by former Enron CFO Andrew Fastow. Bermingham entered prison in May. All three bankers were cleared to return on November 6 (earlier). In the UK, unlike in the US federal system, Bermingham will automatically be eligible for parole after serving half his sentence.

A federal jury in Manhattan last week convicted William Spencer of Oakland, California of bankruptcy fraud in connection with the attempted purchase of Hawaiian Airlines out of bankruptcy in 2003. Spencer is the pastor of the House of Truth in Oakland. He and his associate Paul Boghosian were indicted in April 2005 on charges that they attempted to defraud the US Bankruptcy Court for the District of Hawaii by providing false documentation claiming that their Hawaiian Investment Partners Group could provide $500 million in financing to reorganize the airline. They then allegedly used the false documentation to solicit investors, since they apparently didn’t actually have any money. Boghosian pleaded guilty to bankruptcy fraud on October 29. Sentencing for both men in scheduled for January 30, 2009 before US District Judge Loretta Preska, who presided over the trial (Reuters, DOJ).

Eaton v. Frisby is a civil trade secrets case not directly related to Dickie Scruggs as far as we know, but it came to light as a result of what’s now known as the “Scruggs II” case. It’s under investigation by the FBI in connection with public corruption allegations against Hinds County Circuit Judge Bobby DeLaughter and former Hinds County DA Ed Peters. Frisby maintains that DeLaughter started ruling in favor of Eaton once Peters secretly entered the case on behalf of Eaton.

In a Monday Clarion Ledger story, Jimmie Gates reports on a report filed under seal earlier this month by David Dogan III. Dogan was appointed Special Master in the case after an earlier turn of events we covered here, when DeLaughter removed the first special master under suspicious circumstances and the replacement special master resigned.

In the report, Dogan asserts that Peters maintained improper contact with DeLaughter and recommends that emails and documents showing the communication be produced in connection with the lawsuit.

The documents to be produced show a design, and in certain cases direct evidence, of engaging in contact with Judge DeLaughter on an ex parte basis. Such conduct is not permissible and is, as a matter of law, improper.

In addition to the federal investigation, DeLaughter is the subject of a continuing investigation by the Mississippi Judicial Performance Commission, which suspended him with pay. Circuit Judge Swan Yerger is now handling the lawsuit.

Martin Bodner, former CFO of Tommy Hilfiger Handbags and Small Leather Goods Inc. (a Tommy Hilfinger licensee), was sentenced on Friday to 66 months in prison by US District Judge P. Kevin Castel in Manhattan. Bodner pleaded guilty on September 15 to a two-count information charging him with mail fraud and wire fraud (earlier); he admitted embezzling more than $19 million from the company between 2000 and 2007, largely by using his authority to secretly increase his salary and bonuses, arranging to be reimbursed for phony expenses and using company funds to pay for personal expenses. Bodner was also ordered to pay over $17.3 million restitution and to forfeit luxury items including real estate and cars (DOJ, North Country Gazette).

Althea Jackson and her husband James Jackson on Thursday were each sentenced to 30 months in prison by US District Judge Orlando Garcia in San Antonio for their roles in the theft and resale of more than 5,600 ticket vouchers from Southwest Airlines, resulting in a loss to Southwest of $800,000. The Jacksons pleaded guilty to wire fraud on February 12. Our earlier coverage (here and here) details the involvement of public officials who bought tickets; those who did have all stated that they had no knowledge that the tickets were stolen. It’s not known if the investigation is still open (Express-News, DOJ).

A superseding federal indictment unsealed on Friday afternoon includes the previous immigration and bank fraud charges against former Agriprocesssors CEO Sholom Rubashkin and adds new counts. Rubashkin now faces charges of conspiracy to harbor undocumented aliens for profit, harboring undocumented aliens for profit, conspiracy to commit document fraud, aiding and abetting document fraud, six counts of aiding and abetting aggravated identity theft, and two counts of bank fraud.

Also named are the corporation and four other management team members: Brent Beebe, Hosam Amara, Zeev Levi and Karina Freund. Amara and Levi are believed to have fled to Israel after the May immigration raid at the Postville, Iowa kosher meat processing plant. Amara and Freund were named in an earlier indictment. The Iowa Independent has a full listing of the charges and background.

Former Enron Task Force co-lead prosecutor John Hueston says that the SEC’s insider trading case against Mark Cuban is flimsy, that Cuban isn’t an insider, and that he wouldn’t have brought the case:

….the case really appears to be just a he-said-she-said case. And so, I believe Mr. Cuban has a very strong factual defense before he even gets to any legal arguments. For an insider trading case, he’s not an insider at all. He is essentially a stockholder, essentially pitched to make an additional investment. He was disgusted by that pitch and the direction of the company and sold his stock. And he did so in a very open way consistent with someone who had nothing to hide.

And the SEC in a target-driven matter has now drummed up a case, based on pressured and apparently uncorroborated testimony of one other person on a phone line. That is certainly not a criminal case. And it makes for a risky and flimsy case even under a civil standard. It makes me wonder why the SEC has decided to file this case. And I would not be surprised at all if Mr. Cuban took the SEC to trial over this case.

Hueston is now a partner with Irell & Manella (Corporate Crime Reporter).

The Columbus Dispatch reports that the Office of Congressional Ethics, created earlier this year by the House, will be led by AUSA Leo Wise (.pdf), who successfully prosecuted former National Century Financial Enterprises CEO Lance Poulsen in both his fraud and witness tampering trials. Wise was named staff director and chief counsel. He’ll have his hands full.

VECO employee Dave Anderson, nephew of former VECO CEO Bill Allen, told jurors in the public corruption trial of Sen. Ted Stevens that he was testifying without a formal grant of immunity. He now says he had an immunity agreement with prosecutors and that he “would not have given the same testimony” without it (we briefly discussed his testimony here). His new statements came in a November 15 letter to US District Judge Emmet Sullivan and attorneys for both sides, and were publicly disclosed yesterday in a defense filing that accused prosecutors of suborning perjury.

Prosecutors filed a response later yesterday, saying they have proof that Anderson’s new statements are false and proof of “Mr. Anderson’s collusion with an interested party in the preparation and transmission of Mr. Anderson’s letter.” (WaPo)

After a Wednesday bond hearing in Cedar Rapids, Iowa, US Magistrate Judge Jon Scoles ruled on Thursday that former Agriprocessors CEO Sholom Rubashkin must remain in federal custody pending his trial on bank fraud charges. Scoles ruled that Rubashkin is a serious flight risk, citing substantial evidence against Rubashkin and the $20,000 in cash and passports found in a travel bag in the Rubashkin home. Agriprocessors is the giant kosher slaughterhouse in Postville, Iowa that was raided in May by immigration officials, resulting in the arrest and detention of about 400 illegal immigrants.

Rubashkin was arrested last Friday on the bank fraud charges (earlier); he is accused of diverting millions of dollars in customer payments that were part of First Bank’s collateral and instructing an employee to delete evidence of the scheme from the company’s computers. His arrest came just one day after he posted bond on criminal immigration charges resulting from the May raid. His trial on the immigration charges is scheduled for January 20, but no date has been scheduled on the bank fraud charges (Des Moines Register, Iowa Independent).

Meanwhile tensions are reportedly very high in Postville, where the plant sits idle and workers have not been paid as promised. Threats of violence have been reported (Iowa Independent, Failed Messiah).

Trevor Blackann, a former legislative assistant to Sen. Kit Bond (R-Mo.) and Rep. Roy Blount (R-Mo.), on Thursday pleaded guilty before US District Judge Richard Roberts in DC to making a false statement on his 2003 tax return. He admitted failing to report at least $4,100 in illegal gifts that he received from lobbyists connected with Jack Abramoff, including a paid trip to see a 2003 World Series game. He also “admitted knowing that the World Series trip and other tickets, meals and drinks provided by the lobbyists were given to him for, or because of, official action the lobbyists were seeking from Blackann.” The time frame of the activities correspond to his employment with Sen. Bond. No sentencing date was announced (DOJ, The Hill).

A federal jury in Pittsburgh on Wednesday convicted former Pennsylvania Superior Court Judge Michael Joyce on two counts of mail fraud and six counts of money laundering for giving false information to colllect an insurance settlement. Joyce collected $440,000 from two insurance companies after a slow-speed traffic accident in August 2001; evidence presented at trial showed that he used his official letterhead as part of his effort to obtain the settlement. He claimed to have debilitating neck and back injuries, but later engaged in physical activities in public, including golfing, scuba diving, rollerblading and piloting airplanes. Joyce was suspended last year after being indicted; he chose not to run for reelection. His sentencing is scheduled for March 10, 2009 (Law.com, AP).

Longtime Massachusetts State Senator Dianne Wilkerson, a Democrat from Roxbury, was indicted on Tuesday by a federal grand jury in Boston on eight counts of of attempted extortion under color of official right for allegedly accepting $23,500 in cash payments between June 2007 and October 2008. Wilkerson was arrested on October 28 after being photographed by an undercover agent stuffing a $1000 cash payment into her bra (earlier). The bribes were allegedly paid to help secure a liquor license for a nightclub and to push legislation to transfer public land for a proposed private development. Wilkerson resigned her seat yesterday. The investigation remains active (DOJ, Boston Globe).

The Daily Journal reports that Joey Langston will be sentenced for his role in “Scruggs II” on December 16 before Chief US District Judge Michael Mills. Langston pleaded guilty in January to a one-count information charging him with bribing Judge Bobby DeLaughter. I anticipate more pleas and/or indictments shortly. Here’s our recent coverage.

Attorneys for Mark Cuban on Tuesday fired back at the SEC on Cuban’s Blog Maverick, disputing the SEC’s claim that Cuban agreed to keep confidential the information he was given about a proposed stock sale at Mamma.com Inc. The entry excerpts their transcribed interview with former Mamma.com CEO Guy Faure:

CHRISTOPHER CLARK :

1) Q- We spoke earlier about you were telling Mr. Cuban in words or substance : “I have confidential information for you”.

A- Right.

2) Q- Do you recall anything Mr. Cuban said in response or reply to that statement by you ?

A- No, I do not.

They also ask:

Why did the SEC end their multi-year investigation of Mamma.com Inc. for alleged securities laws violations days before interviewing present and former Mamma.com Inc. executives about this matter? Was the timing a coincidence? We think not.

Reuters has more.

The founder and CEO of PurchasePro, Charles E. “Junior” Johnson of Las Vegas, on Friday was sentenced to 108 months in prison for securities fraud by US District Judge Liam O’Grady in Alexandria, Virginia. Johnson was convicted on May 15 of conspiracy, securities fraud, witness tampering, and obstruction in connection with a scheme to falsely inflate the now-defunct company’s first quarter 2001 revenue to meet Wall Street’s expectations. PurchasePro’s primary product was a business-to-business “marketplace license” sold through its business partner, AOL. Johnson was considered the mastermind of the scheme; six other PurchasePro executives were convicted and AOL paid $210 million to settle charges aiding and abetting securities fraud (DOJ, AP).

McClatchy reports that Senate Republicans decided to postpone the vote they had plannned yesterday to decide whether to toss convicted Sen. Ted Stevens out of the Senate Republican Conference until his Senate race is resolved. The latest results (ADN/McClatchy) have Stevens’ Democratic opponent, Anchorage Mayor Mark Begich, ahead of Stevens by 3,724 votes with only about 2,500 absentee ballots left to be counted.

It’s been a bad year for former Agriprocessors CEO Sholom Rubashkin. The giant kosher meat processing plant he ran for years was raided by ICE in May, resulting in the arrest and detention of about 400 illegal immigrants and his removal as CEO. The Postville, Iowa plant is owned by his father, Aaron Rubashkin. On October 30, Sholom Rubashkin was arrested and charged with charged with with conspiracy to harbor undocumented aliens for profit, aiding and abetting document fraud and aiding and abetting aggravated identity theft. On November 5, Agriprocessors filed Chapter 11 bankruptcy.

Last Friday, he was rearrested, this time on charges of bank fraud. He’s accused of defrauding a bank on Agriprocessors’ $35 million line of credit by diverting millions of dollars in customer payments that were part of the bank’s collateral. He also allegedly instructed an Agriprocessors employee to delete evidence of the scheme from the company’s computers.

Rubashkin had been released on bond Thursday on the October 30 immigration charges, but he was taken back into custody early Friday. After an initial appearance later on Friday before US Magistrate Judge Jon Scoles, he was ordered held pending a detention hearing scheduled for Wednesday (DOJ, Des Moines Register).

After a two week trial in Tacoma, on Thursday a federal jury convicted Charles Nolon Bush of Port Orchard, Washington on 27 counts including securities fraud, wire fraud, mail fraud and money laundering in connection with a Ponzi scheme he allegedly operated between 1998 and 2002. Bush had left the US in 2002 and was arrested in Poland after being indicted in 2006. He was extradited in 2007. Bush was accused of accepting $35 million through three entities from hundreds of investors with promises of high yields, then diverting most of it to fund a lavish lifestyle and pay off early investors. He faces a statutory maximum of 20 years in prison on each count; sentencing is scheduled for February 6, 2009 before US District Judge Benjamin Settle (DOJ, Bizjournal).

When WexTrust Capital LLC principals Steven Byers and Joseph Shereshevsky were arrested in August and charged with conspiracy to commit secuties fraud (earlier), we speculated that more criminal counts might be forthcoming due to the massive civil fraud charges filed by the SEC which allege a $255 million Ponzi scheme. Last week, Byers and Shereshevsky were indicted on one count of securities fraud and one count of conspiracy in connection with the same $9.2 million fraud scheme alleged when they were arrested. No further criminal activities are included in the indictment — at least, not yet (DOJ, Virginian-Pilot).

October 13: Mark Cuban launches Bailout Sleuth, a blog which exposes the secrecy surrounding the government TARP bailout and documents the massive giveaway of federal funds.

November 17: The SEC files a civil complaint (.pdf) charging Cuban with insider trading, alleging that he avoided a loss of $750,000 by selling his shares of Mamma.com Inc. based on non-public information.

Coincidence? Cuban’s response on his Blog Maverick claims that the matter has been before the SEC for two years. Why now?

Cuban calls it “a product of gross abuse of prosecutorial discretion.” It’s also pocket change to him. Bloomberg has more.

TIME reported on Friday that it has obtained internal documents showing that USA Leura Canary continued to direct the prosecution of former Alabama Governor Don Siegelman long after she formally recused herself. Canary’s husband Bill is a close political ally of Alabama Governor Bob Riley, who defeated Siegelman in 2002 and easily won reelection against him in 2006 after he was convicted in mid-campaign. The documents are among those provided by whistleblower Tami Grimes, who was prominently featured in 60 Minutes’ feature on the Siegelman case. Grimes also provided evidence of contact between a juror and a member of the prosecution team.

The US Court of Appeals for the Eleventh Circuit will hear oral arguments December 9 in the appeal of Siegelman and co-defendant Richard Scrushy. The DOJ and the House Judiciary Committee continue to investigate. The Press-Register has more.

The “other” criminal matter involving Dickie Scruggs is the case in which Joey Langston pleaded guilty in January to bribing Judge Bobby DeLaughter via former Hinds County DA Ed Peters on behalf of Scruggs to influence the Wilson v. Scruggs civil suit. Prosecutors are referring to this case as “Scruggs II”. We’ve heard nothing recently until last week, when prosecutors filed a motion for downward departure from the maximum sentence permitted under Langston’s plea agreement. The motion was supposed to be filed under seal; it was inadvertently made public and quickly withdrawn.

While it’s no secret that Langston pleaded guilty (.pdf) and agreed to cooperate in exchange for a maximum sentence of 36 months, the withdrawn filing contained details not intended to be made public. Still, we can tell you that the case is very much alive (Clarion-Ledger, AP/Sun Herald).

The US Supreme Court on Friday agreed to hear the appeal of former Enron Broadband Division strategic planning executive Scott Yeager, who is fighting a retrial on insider trading charges. Yeager’s retrial on 13 onsider trading and money laundering counts had been scheduled for next March before US District Judge Vanessa Gilmore in Houston, but the Supreme Court is not expected to hear arguments before February or March. Yeager was acquitted in 2005 on conspiracy and fraud counts but jurors were hung on insider trading and money laundering counts. The essence of his appeal is that he couldn’t have engaged in insider trading and money laundering since he’s not guilty of participating in the alleged conspiracy and fraud. In March, a three-judge panel of the Fifth Circuit ruled that Gilmore was correct in refusing to dismiss the counts.

The Court’s list of accepted cases didn’t include the appeal of Yeager’s co-defendant Rex Shelby, former broadband divison software executive. Shelby’s attorney held out hope that he won’t be on Monday’s rejected list. His retrial is scheduled for January. A third co-defendant, Joseph Hirko, pleaded guilty last month to one count of wire fraud and sgreed to serve a sentence of 12 to 16 months in prison (Houston Chronicle).

McClatchy reports that Senate Republicans will hold a secret vote on Tuesday and decide whether to toss convicted Sen. Ted Stevens out of the Senate Republican Conference. Meanwhile, at the Washington Post, jurors explain how badly Stevens hurt himself by taking the stand in his defense.

Robert Brodzin, former CFO of for Shriners Hospital for Children – St. Louis, was sentenced on November 7 to 41 months in prison by US District Judge Catherine Perry for embezzling $828,000 from the hospital between 2004 and 2008. Brodzin pleaded guilty in August to one count of mail fraud (earlier). He admitted stealing the funds by billing the hospital for services that were never rendered by three dummy companies he had set up. He used the money for luxuty items and and for his tanning salon business (DOJ, Bizjournal).

Bill Weimar, former owner of now-defunct Alaska-based Allvest, Inc., was sentenced on Wednesday by Chief US District Judge John Sedwick in Anchorage to six months in prison on public corruption charges, to be followed by six months home detention. Weimar pleaded guilty in August to a two count information charging him with conspiracy to commit honest services mail and wire fraud and structuring financial transactions (earlier). He admitted conspiring in 2004 with an unnamed consulting firm to funnel $20,000 in illegal payments to Jerry Ward, a former state senator who was trying to regain his seat in 2004; Ward allegedly would have supported a private prison project in which Weimar held a contingent interest. VECO (of Ted Stevens infamy) was initially a partner with Allvest in the proposed prison project but was apparently no longer involved by the time of the conspiracy (Anchorage Daily News, DOJ).

Raffaello Follieri, the recently convicted former boyfriend of actress Anne Hathaway (earlier), is not happy with conditions in the federal prison in Brooklyn and wants to go back to the facility in Manhattan where he was held pending trial (MSN/AP). Hopefully his fellow inmates won’t read the story.

Raoul Weil, chairman and CEO of UBS’ global wealth management and business banking division, on Wednesday was indicted by a federal grand jury in the Southern District of Florida on charges of conspiring to defraud the IRS by helping US citizens avoid paying federal income tax. The indictment (.pdf) comes as part of the DOJ’s ongoing investigation of UBS’ cross-border banking business. Weil’s division provides cross-border services to about 20,000 clients with assets of about $20 billion. The indictment alleges that about 17,000 of those clients concealed their identities and Swiss bank accounts from the IRS, and that UBS assisted them by failing to report Form 1099 information to the IRS. Weil is accused of facilitating this and failing to stop it (Bloomberg, DOJ). UBS has issued a press release stating that Weil will relinquish his duties.

In a unanimous decision (.pdf), a three-judge panel of the US Court of Appeals for the Fourth Circuit on Wednesday affirmed the public corruption indictment of US Rep. William Jefferson (D-La.), upholding the US District Court’s earlier decision refusing Jefferson’s motion to dismiss most of the 16 counts he faces. Jefferson contended that the grand jury could have heard some protected Speech or Debate Clause materials, claiming that any mention of Speech or Debate Clause material in a grand jury proceeding mandates the dismissal of all counts related to that evidence. The court rejected this argument, ruling that even if the grand jury heard some testimony about Jefferson’s congressional activities it wouldn’t be enough to overturn the indictment:

The principle of grand jury independence is firmly rooted and jealously protected in our federal system of justice. Because it is an independent investigative body, the federal courts have consistently accorded a grand jury “wide latitude to inquire into violations of criminal law.”

Barring an appeal to the US Supreme Court, Jefferson’s is expected to stand trial early next year (Times-Picayune).

Viktor Savtyrev of Old Bridge, New Jersey was arrested on Monday and charged with two counts of violating a federal cyberextortion statute for allegedly threatening to hack the computer system of his former employer if the company didn’t meet his demands for money, better medical coverage and a good job reference. Savtyrev, a systems administrator, was one of 14 employees laid off on November 5 by Third Avenue Management, a Manhattan-based mutual fund manager. The next day, he allegedly emailed the company attorney and three employees, threatening to breach and damage the company’s computers if his demands weren’t met. He repeated his threats in an additional email and two phone conversations which were recorded, at one point saying he would get “comrades from Belarus” to help him hack the company’s servers. Savtyrev is a Russian but has legal permanent resident status — at least for now. At his initial hearing on Monday in US District Court in Newark before US Magistrate Judge Patty Shwartz, Savtyrev’s attorney called it “an idle threat.” A bail hearing is scheduled today. He can probably forget about getting that good job reference (Newark Star-Ledger, Computerworld).

Jeffrey Koger of Herndon, Virginia, pleaded guilty to wire fraud and tax evasion counts on Monday before US District Judge Leonie Brinkema in Alexandria. Koger was the formerly the CFO of his father’s real estate management firm, Koger Management Group, which managed about 400 homeowners associations. He admitted embezzling about $3 million from a bank account that received dues from homeowners and distributed them to the various associations. On about 140 occasions between 2003 and 2006 he diverted funds to his own accounts; among other things, he invested $733,000 of the embezzled funds in a restaurant and paid a contractor almost $500,000 to remodel his house and a fitness center. He also admitted failing to pay more than $775,000 in income taxes during that period.

The investigation began after Robert Koger, the father, told Fairfax City police that he suspected his son had embezzled $800,000 before leaving the firm in late 2006. The firm filed for bankruptcy in July 2007 but Robert Koger has said he intends to repay the associations.

Jeffrey Koger’s sentencing is scheduled for February 6, 2009; he faces a maximum of 25 years in prison, but he also faces a Virginia state trial later in February on multiple violent felony charges in connection with a shootout with police early this year (DOJ, WaPo).

Grant Gaspard of Olympia, Washington, a former assistant fire chief, on Friday pleaded guilty to mail fraud before US District Judge Ricardo S. Martinez in Seattle. In an indictment unsealed in August, Gaspard was charged with embezzling over $500,000 from South King Fire & Rescue, where he was in charge of financial and procurement operations. Gaspard admitted operating an elaborate scheme involving fraudulent purchase orders and a fake company; he used the embezzled funds to buy luxury goods. He also admitted submitting phony documentation to cover up unauthorized purchases on his fire district credit card. Gaspard faces a probable sentence of 33 to 41 months in prison when he is sentenced on January 30, 2009 (Tacoma News Tribune, DOJ).

McCourt Construction Company was sentenced on Friday to a $500,000 fine and three years probation by US District Judge Richard Stearns in Boston for its role in an overbilling scheme on Boston’s Big Dig project. Stearns also ordered the company to pay $600,000 restitution to the Massachusetts Turnpike Authority. McCourt pleaded guilty earlier this year to conspiracy to defraud the US government with respect to claims on a federal highway project. Two of its supervisors pleaded guilty conspiracy to commit highway project fraud by making false statements and were sentenced last month. The charges arose from overbilling on the I-93 Tip O’Neill Tunnel project. McCourt admitted participating in over 1500 instances of overbilling between 2002 and 2005 in which subcontractors charged journeyman labor rates for work actually done by apprentices (DOJ, Boston Bizjournal).

US District Judge Sean McLaughlin held a status conference on Friday afternoon in the pending retrial of former Allegheny County Coroner Cyril Wecht on public corruption charges. McLaughlin was named to handle the case only a week earlier. AUSA James Wilson told McLaughlin that the government plans to file for a change of venue, claiming bias due to media coverage will make it impossible to select jurors. That’s right — the government wants a change of venue. Considering the conduct of US District Judge Arthur Schwab and former lead prosecutor Stephen Stallings, it’s easy to see why they’re worried. AUSA Leo Dillon told McLaughlin that a new indictment will be filed which will see 27 counts dropped, reducing the number of counts to 14. The original indictment of January 2006 included 84 counts.

McLaughlin set this Friday as the deadline for filing a new indictment and November 21 as the deadline for the defense to file new dismissal and suppresion motions and for prosecutors to file a change of venue motion, but he declined to set a new trial date: “I just don’t think it makes sense right now to throw a dart out there to try to hit a date that isn’t likely to stick anyway.” Perhaps he sees the tenure of USA Mary Beth Buchanan coming to a merciful end soon into the coming administration (Pittsburgh Post-Gazette, Tribune-Review).

Richard Walters of Bowie, Maryland, brother of DC Tax Office fraud ringleader Harriette Walters, was sentenced on Tuesday to 51 months in prison by US District Judge Alexander Williams in Greenbelt, Maryland for his role in the $48 million fraud scheme. He had pleaded guilty to receipt of stolen property and conspiracy to commit money laundering in connection with a property tax refund scheme, and had cooperated with authorities. Walters’ business, Helmet’s Plumbing, was used to launder 15 fraudulently issued DC tax refund checks totaling $4.9 million between 2001 and 2007. Over $1 million of that amount went into accounts he controlled.

Five more cooperating defendants will be sentenced by Judge Williams, including three in December. Harriette Walters pleaded guilty in September in DC (earlier). She will be sentenced on March 25, 2009 by US District Judge Emmet Sullivan (DOJ, WaPo).

Colleen Walsh, the alternate juror in the Ted Stevens trial who replaced AWOL Juror No. 4, is blogging about her experience: Juror 11 Explains All. She has her own names for the cast of characters, likening lead prosecutor Brenda Morris to Rosie Perez and lead defense attorney Brendan Sullivan to Mr. Burns of The Simpsons.

David Bermingham, Giles Darby and Gary Mulgrew, three British investment bankers known as the NatWest Three, will now be able to leave for the UK to serve the remainder of their 37 month prison sentences. On Thursday, the three men appeared before US Magistrate Judge Frank Maas in New York, who approved the transfers. The former Greenwich NatWest bankers were indicted on seven counts of wire fraud in 2002 in connection with a scheme devised by former Enron CFO Andrew Fastow and his right-hand man Michael Kopper. They pleaded guilty in 2007 to one count of wire fraud and were sentenced to 37 months in prison plus a total of $7.3 million in restitution by US District Judge Ewing Werlein in Houston on February 22, 2008 (earlier). Their plea agreements allowed a transfer to the UK after several months, where they will be eligible for parole after serving half their sentences. Each has already served about six months (Bloomberg).

USAO Michael Garcia (Southern District of New York) said Thursday that his office will not seek criminal charges against former New York Governor Eliot Spitzer in the Emperors Club VIP case. Four people connected to the operation have pleaded guilty to prostitution and/or money laundering charges (earlier). From the press release (.pdf):

ELIOT SPITZER has acknowledged to this Office that he was a client of, and made payments to, the Emperors Club VIP. Our investigation has shown that on multiple occasions, Mr. SPITZER arranged for women to travel from one state to another state to engage in prostitution. After a thorough investigation, this Office has uncovered no evidence of misuse of public or campaign funds. In addition, we have determined that there is insufficient evidence to bring charges against Mr. SPITZER for any offense relating to the withdrawal of funds for, and his payments to, the Emperors Club VIP.

In light of the policy of the Department of Justice with respect to prostitution offenses and the longstanding practice of this Office, as well as Mr. SPITZER’s acceptance of responsibility for his conduct, we have concluded that the public interest would not be further advanced by filing criminal charges in this matter.

Spitzer issued a separate statement:

I appreciate the impartiality and thoroughness of the investigation by the U.S. Attorney’s Office. I acknowledge and accept responsibility for the conduct it disclosed.

Bloomberg has more.

Another former natural gas trader has been sentenced to prison for reporting false prices to industry publications in order to influence pricing. Donald Burwell of Richardson, Texas, a former El Paso Corporation trader, was sentenced to 10 months in prison on Monday by US District Judge Vanessa Gilmore in Houston. He pleaded guilty in 2006 to one count of reporting fictitious natural gas trades (Reuters, DOJ). See earlier here and here for other prosecutions.

We won’t know for a couple of weeks whether or not just-convicted Alaska Sen. Ted Stevens will retain his seat, but there are two other races of interest involving public corruption cases:

In Louisiana’s 2nd Congressional District, Democratic Rep. William (Cold Cash) Jefferson easily won his primary runoff race over former TV news anchor Helen Moreno (Times-Picayune). He is heavily favored to win the December 6 general election contest against Republican candidate Anh “Joseph” Cao, an attorney and former ethics professor (profiled here). Jefferson was indicted in 2005 on 16 counts including bribery, racketeering, money laundering and obstruction of justice.

Texas’ Third Court of Appeals Chief Justice Ken Law, whose recent alleged actions have caused controversy in the cases of Tom DeLay associates John Colyandro and Jim Ellis (here and here), has been defeated in his reelection bid by Woodie Jones, who formerly served on the court for 12 years (Austin American-Statesman). The final margin was about 52% to 48%. This will mean the court will now have three Democrats and three Republicans. However, the court has already refused to reconsider its recent ruling and it takes a majority to overturn that. Travis County DA Ronnie Earle is retiring; it’s not known if his successor, Rosemary Lehmberg, will be as aggresive in pursuing a further appeal.

In Hartford on Friday, US District Judge Christopher Droney ruled that investor losses were between $544 million and $597 million in the case of four former executives of Berkshire Hathaway’s General Re and one former executive from AIG who were convicted in February (earlier) on charges related to fraudulent reinsurance accounting transactions. While it’s less than the $1.4 billion figure put forth by prosecutors, it’s still enough to indicate the probability of substantial prison sentences. Droney also ruled that the fraud had more than 250 victims, which also increases the potential sentences under the guidelines. The original sentencing date of May 15, 2008 was postponed; a new date has not been scheduled (Reuters).

In Los Angeles on Monday, US District Judge John Walter sentenced the last two defendants in the long-running kickback scheme at the former Milberg Weiss law firm, now known as Milberg LLP. Former client Steven Cooperman, who acted as a lead plaintiff in some Milberg cases, was sentenced to four months in prison and two years of supervised release; Cooperman pleaded guilty to a conspiracy count last year. Paul Selzer, a former outside attorney who helped Milberg funnel kickbacks to clients, was sentenced to two years probation; Selzer pleaded guilty in July to a tax obstruction count (Reuters).

Former Goldman Sachs trader David Pajcin, one of the principals in a wide-ranging $6.7 million insider trading and securities fraud scheme, has disappeared. Pajcin was sentenced in January to time served (earlier) after having been jailed for about two years but was put on three years supervised release. A separate civil case against Pajcin and other defendants is still ongoing before the SEC, and SEC trial lawyer Scott Black has now informed US District Judge Kimba Wood that Pajcin “is in violation of his probation.” Neither the USAO in Manhattan nor Pajcin’s criminal defense attorney knows where he is. Pajcin has family in Croatia and is believed to have left the country (Bloomberg, Reuters).

The Alaska Bar Association on Thursday asked the Alaska Supreme Court to suspend Sen. Ted Stevens’ law license pending his appeal. Under state bar rules, a felony conviction is effective as soon as the jury rules, but Stevens will be allowed to file defense memoranda (Anchorage Daily News).

AWOL Juror No. 4, now identified as Marian Hinnant, did actually show up Monday to explain her absence to US District Judge Emmet Sullivan. She did go to California, but not for her father’s funeral — he’s alive and living in North Carolina. Turns out she had bought a ticket to fly to California to see the Breeders’ Cup at Santa Anita Park, and she didn’t expect the trial to last as long as it did. Her reported statements in court Monday were bizarre and incoherent. Judge Sullivan did not sanction her and said he was convinced that she had been unable to continue deliberating; he was kind enough not to say it’s because she’s a raving loon (ADN/McClatchy, Legal Times).

Mitchel Guttenberg, a former executive director in the equity research department of UBS Securities LLC, was sentenced on Monday to 78 months in prison for insider trading by US District Judge Deborah Batts in Manhattan. Guttenberg pleaded guilty (.pdf) in February to two counts of conspiracy and four counts of securities fraud, admitting that he frequently fed inside information to two clients from 2001 to 2006 (Bloomberg, $WSJ$).

In Washington last week, US District Judge Richard W. Roberts sentenced Michael Dwayne Logan of Baltimore to 21 months in prison for using a camcorder in a theater to tape two movies. Logan was caught last November in a DC theater using a high definition camcorder to tape Disney’s Enchanted; he had recorded about 50 minutes of the film when he was arrested. A forensic investigation connected him to a pirated copy of 28 Weeks Later that DC police had obtained earlier in the year. Logan pleaded guilty to two counts of Unauthorized Recording of Motion Pictures in a Motion Picture Exhibition Facility (Ars Technica, DOJ).

US District Judge Sean McLaughlin, based in Erie, Pennsylvania, on Friday was selected by Chief US District Judge Donetta Ambrose to preside at the retrial of former Allegheny County Coroner Cyril Wecht. No trial date has been set and it’s not certain that there will be a retrial, but the mediation process has broken down. Former Third Circuit Judge Timothy Lewis, who has been working with both sides to to avoid a retrial, said last week that talks had ended.

It became clear to me that one side was unwilling to participate in the necessary follow-up that could have been productive. I will not work with a party who appears uncommitted to a mediation process, although I hasten to add, that is its prerogative.

He didn’t say who was unwilling to participate in the follow-up, but there’s no doubt it was USA Mary Beth Buchanan (Pittsburgh Post-Gazette, Tribune Review).

In US District Court in Los Angeles last week, four officials connected with Ralph’s Supermarket pleaded not guilty to labor fraud charges in connection with the 2003-2004 California supermarket strike and lockout. Scott Drew, a vice president with Cincinnati-based Kroger, which owns Ralph’s, and former Ralph’s managers Charles Vance, Randall Kruska and Karen Montoya were indicted in September on charges that they participated in a conspiracy to secretly rehire hundreds of locked-out employees under false names and false social security numbers during the 2003-2004 labor dispute. A December 23 trial date has been scheduled (Supermarket News, LA Times/AP). There’s no word about former Ralph’s vice president Patrick McGowan, who was indicted on the same charges.

In a meeting Thursday with the editorial board of the Fairbanks Daily News-Miner, Sen. Ted Stevens on Thursday claimed his conviction was still pending: “I’ve not been convicted yet. There’s not a black mark by my name yet, until the appeal is over…” (News-Miner)

The Anchorage Daily News reports that he reiterated the claim Thursday night in a televised debate with his general election opponent, Anchorage Mayor Mark Begich, saying: “I have not been convicted of anything.”

Meanwhile, AP reports that US District Judge Emmet Sullivan has ordered missing Juror No. 4 to appear before him on Monday to explain her absence and refusal to communicate with the court. Good luck with that, Judge Sullivan.

After only about four hours of deliberation, a jury in US District Court in Columbus has convicted former National Century Financial Enterprises CEO and co-founder Lance Poulsen on one count of conspiracy, one count of wire fraud and money laundering conspiracy, four counts of concealment of money laundering and six counts of securities fraud in connection with the company’s 2002 collapse which cost investors about $1.9 billion. The testimony of the government’s star witness, former executive VP for compliance Sherry Gibson, was central to the prosecution’s case. Gibson’s testimony was critical in the trial which resulted in the March convictions of five other former National Century executives. In addition, jurors heard Gibson testify about the attempt of Poulsen and his associate Karl Demmler to bribe her to change her story; Poulsen was convicted in that case and sentenced to 10 years in prison in August. US District Judge Algenon Marbley did not immediately set a sentencing date in this case (Columbus Dispatch, Columbus Bizjournal).

Chief US District Judge Michael Davis on Friday refused to grant bail to Tom Petters, affirming the earlier ruling of US Magistrate Judge Jeffrey Keyes (Star Tribune).

Meanwhile, WCCO’s Esme Murphy has filed a complaint with Judge Davis over the seemingly preferential treatment shown to some Petters defendants, including the unscheduled bond hearing for Larry Reynolds:

I am amazed that this group of co-defendants that have admitted to stealing a total of 3 billion dollars from unwitting investors is getting this kind of special treatment.

Judge Davis will look into it but told Murphy that “all court hearings should be open to the public and all hearings should be posted in the court calendar.”

Petters associate Larry Reynolds, who pleaded guilty last week to money laundering conspiracy (earlier), was granted bail on Thursday in Minneapolis by US Magistrate Judge Susan Nelson. He and his wife agreed to surrender their passports and put up their home as security for the $2.5 million bond, and he will be subject to home detention and electronic monitoring.

Although we previously noted that he was said to be negotiating with prosecutors for his release, controversy arose because the matter was not on the public docket. From the Star Tribune:

Assistant U.S. Attorney Timothy Rank was walking toward the courtroom with Reynolds’ attorney, Fred Bruno, when they recognized a reporter and froze in their tracks.

Despite their protestations, it certainly gave the appearance that they had something to hide. And how could Reynolds be allowed to use his home as security when US District Judge Ann Montgomery has frozen his assets? With Judge Montgomery’s dubious actions already raising questions, it’s no wonder that the commenters on this and just about every other Star Tribune story on the Petters fiasco believe some kind of behind-the-scenes skulduggery is going on.

Kenneth Wade Pearson, the webmaster of the notorious St. Regis University diploma mill, was sentenced to 48 months in prison on Tuesday in US District Court in Spokane, Washington. He received a six month sentence for conspiracy to commit wire and mail fraud in connection with the St. Regis operation, and a concurrent 48 month sentence for receipt of child pornography. Pearson’s testimony was key in in implicating the Randock family, who ran the operation (earlier coverage). Owners Steven and Dixie Randock pleaded guilty and are currently serving 36 month prison sentences, while their daughter Heidi Lorhan is serving a 12 month sentence.

When Pearson was investigated during the diploma mill probe, authorities found over 11,000 child porn images on his computer. He claimed he had downloaded the porn images at Dixie Randock’s request so she could start a porn website, but she was never charged with porn possession. In any event, he immediately became a cooperating witness and provided critical information on the St. Regis operation, which resulted in prosecutors recommending a lesser sentence on the porn charge than called for by guidelines (Spokesman-Review).

In Los Angeles on Monday, US District Judge John Walter sentenced former Milberg Weiss partners David Bershad and Steven Schulman to six months in prison each for their roles in the long-running kickback scheme at the firm, now known as Milberg LLP. Bershad pleaded guilty in July 2007 to a one-count information charging him with obstruction and making false statements. He was the first partner to plead guilty and his cooperation helped the DOJ obtain guilty pleas from the firm and from principals Melvyn Weiss and Bill Lerach, who are currently serving 30- and 24-month prison sentences, respectively. But Walter rejected his plea for probation, calling him an architect of the scheme. Schulman pleaded guilty to a racketeering count in October 2007. Both men had already agreed to forfeit their gains — $7.75 million for Bershad, $1.85 million for Schulman (Bloomberg, Reuters).

Longtime Massachusetts State Senator Dianne Wilkerson of Roxbury was arrested on Tuesday by federal authorities on charges of attempted extortion under color of official right and theft of honest services as a State Senator. She is accused of taking eight bribes totaling $23,500: it’s alleged that in one scheme, she took payments totaling $8,500 to help secure a liquor license for an undercover agent and a cooperating witness posing as constituents; in another, that she took payments totaling $15,000 in a scheme to transfer public land for a proposed development to an undercover agent posing as a private developer. The evidence includes a photograph taken by the undercover agent purportedly showing her stuffing a $1000 bribe in her bra. She appeared on Tuesday before before US Magistrate Judge Timothy Hillman but did not enter a plea; she was released on $50,000 bond and ordered to appear at a hearing on November 17 (Boston Globe, Boston Herald, DOJ). A related Herald article suggests that this is the beginning of a wider scandal.

Andrew Parker of San Antonio, owner of San Antonio Trade Group, Inc., was sentenced on Monday to 117 months in prison by US District Judge Fred Biery for defrauding the Export-Import Bank of the US of $107 million. In an indictment unsealed on May 1, Parker was charged with conspiracy, wire fraud, use of a false document, money laundering, tax evasion and filing a false tax return. In August, he pleaded guilty to 11 of the 28 counts in the original indictment; Our earlier entries cover his alleged actions, which involved such a large percentage of the Ex-Im Bank’s loan portfolio that the bank’s management has had to revamp the whole program and cut back its offerings. Yet the Express-News quotes Parker as telling Judge Biery: “I was but a cog in this big machine. The truth is I’m caught in a system that, like with many agencies in Washington, is defective.” The DOJ Press Release (.pdf) is here.

Another sidebar to the Petters securities fraud case: Tom Petters’ attorney Jon Hopeman was approached by a man who said he had connections and could make the case against Petters “go away” for $250,000. The man, Derrick Lee Riddle of Minneapolis, has at least four felony convictions. Hopeman called the FBI, and agents taped him on audio and video making the offer at Hopeman’s office. He now faces state charges of attempted theft by swindle and attempting to aid an offender (St. Paul Pioneer Press).

Although early news reports stated that US District Judge Emmet Sullivan had set January 26 as the sentencing date for convicted Sen. Ted Stevens, he changed his mind. Now he has set a hearing dte of February 25 and has postponed sentencing until sometime after that. He has given Stevens’ attorneys until December 5 to file motions. Anchorage Daily News (McClatchy) has expanded coverage of the verdict and an editorial about how he lost his way: “His story, however, didn’t persuade the jury — and it shouldn’t persuade voters, either.”

Former Enron CEO Jeff Skilling has been moved from the low-security federal prison at Waseca, Minnesota to a facility in the suburban Denver area. The federal prison in Englewood, Colorado has recently been changed from medium security to low security, while the Minnesota facility is being turned into a low security prison for women. Skilling is serving a 24 year prison sentence for conspiracy, securities fraud and insider trading; his appeal is still pending before the US Court of Appeals for the Fifth Circuit. The Rocky Mountain News also notes that former Enron Broadband CEO Ken Rice, who has been serving his 27 month sentence for securities fraud at a federal prison camp in Beaumont, Texas, was moved to a halfway house in Houston in August in anticipation of his release in February 2009.

In Baltimore on Friday. US District Judge Catherine Blake sentenced Alan Fabian of Cockeysville, Maryland to nine years in prison for operating two different investment schemes which defrauded a Georgia company, banks and other funding sources of an estimated $39.5 million. Fabian, a Republican donor and fundraiser, was co-chair of Mitt Romney’s national finance committee. He pleaded guilty in May to one count of mail fraud and one count of filing a false tax return (earlier) after being indicted in August 2007 on 26 counts including bankruptcy fraud, mail fraud, money laundering, obstruction of justice and perjury. In one scheme, Fabian used forged invoices and wire transfer receipts to convince Norcross, Georgia computer leasing company Solarcom into believing that he had purchased millions of dollars in computer equipment and software; he then sold the nonexistent products to Solarcom and leased them back, using the proceeds on a lavish lifestyle and to set up a nonprofit consulting firm. He took in $32 million from this operation. In a later scheme, he deceived Provident Bank, Wachovia Bank and an invoice discounting company into providing $7.5 million in funding for entities he controlled including the consulting firm he had set up with the stolen funds from his earlier scheme (Baltimore Sun, DOJ).

Three Florida A&M University students have been indicted by a federal grand jury in Tallahassee for allegedly hacking into the university’s computer system and changing about 650 grades of about 90 students. In most cases, failing grades were changed to “A” grades. In addition, the status of some students was changed from out-of-state to resident. Marcus Barrington, Christopher Jacquette and Lawrence Secrease were charged in a five-count indictment with conspiracy to commit wire fraud and unauthorized computer access, aggravated identity theft, and one substantive count of unauthorized computer access. From the DOJ Press Release:

According to the indictment, the conspirators were able to access the FAMU computer system by surreptitiously installing keystroke loggers on computers used by employees of the registrar’s office. The keystroke loggers enabled the conspirators to obtain the secure user names and passwords of FAMU registrar’s office employees; the conspirators then used these names and passwords to access the FAMU computer system to make both grade and residency changes. The indictment also alleges that after learning that FAMU had reversed the unauthorized grade changes, the conspirators accessed the computer system a second time to change their grades back, once again improving students’ GPAs and changing failing grades to passing ones.

All three men have pleaded not guilty. A trial date of December 15 has been scheduled (Tallahassee Democrat).

The jury has convicted Sen. Ted Stevens on all seven counts of making false statements on his Senate disclosure forms. Sentencing has been set for January 26 (ADN/McClatchy, WaPo/AP).

Kentucky Fen-Phen defendants William Gallion and Shirley Cunningham Jr., who are awaiting retrial on wire fraud and conspiracy charges after their first trial ended in a mistrial in July, were permanently disbarred on Thursday by order of the Kentucky Supreme Court. Both men had been charged with 22 ethical violations in connection with their handling of class action settlement funds from American Home Products on behalf of 440 Kentuckians harmed by the drug. Both agreed to admit to eight of the 22 charged violations; both filed motions to withdraw from the Kentucky Bar under those terms. From the Lexington Herald-Leader:

Gallion and Cunningham admitted in their disbarment orders that they failed to inform their clients in writing about fee arrangements in the fen-phen settlement; failed to tell clients that they were seeking fees greater than contingency fee agreements provided; failed to advise clients about the total amount of the settlement; and failed to get clients’ consent to place $20 million in settlement money in a charitable fund that the lawyers controlled.

The third defendant, Melbourne Mills Jr., has also been under suspension, but the jury acquitted him. His status is still pending. Gallion and Cunningham will be retried in February (earlier coverage).

US District Judge Emmet Sullivan on Sunday dismissed the missing Juror No. 4 in the public corruption trial of Sen. Ted Stevens. He has been unable to contact her since she left suddenly on Thursday evening, saying she had to attend her father’s funeral in California. An alternate juror has been named and deliberations will start from scratch Monday morning (Anchorage Daily News).

First of a four-part Star Tribune series: The collapse of the Petters empire. Long but worth the read. How could he have gotten away with a multi-billion dollar fraud scheme for so long? The warning signs were ample.

Jack Campbell, former lobbyist for the Texas Association of Business, speaks out in a Statesman op-ed about the recently concluded prosecution of TAB (earlier) which saw charges against Campbell dropped:

Ronnie Earle spent six years trying to get the taste of sour grapes out of his mouth. He badly wanted to convict TAB for exercising the right of free speech but lost. His attempt at pitting corporate America against the little guys was nothing more than a power play to avenge his goose-egg track record of convicting public figures.

Meanwhile, a Statesman editorial frets about corporate money in elections; too bad they aren’t more concerned with free speech. At least they acknowledged that Earle’s declaration of victory was ludicrous.

Raffaello Follieri, the former boyfriend of actress Anne Hathaway, was sentenced in Manhattan on Thursday by US District Judge John Koeltl to 54 months in prison for defrauding real estate investors. Follieri pleaded guilty in September to one count of conspiracy, eight counts of wire fraud and five counts of money laundering (earlier). He admitted soliciting more than $2 million from investors by falsely claiming that he had close connections with the Vatican that enabled him to purchase unwanted Catholic Church properties in the US at a substantial discount; instead he used the money to fund his lifestyle. Per the plea agreement, Koeltl ordered Follieri to forfeit over $2.4 million in cash plus expensive watches and other jewelry (Bloomberg, DOJ).

The jury in the public corruption trial of Sen. Ted Stevens was sent home for the day this morning by US District Judge Emmet Sullivan. He didn’t explain to them why Juror No. 4 was missing, probably because no one seems to know for sure. Last night it was reported that she was leaving for Texas to attend to a sick relative, now she reportedly has gone to California to attend her father’s funeral. Judge Sullivan plans to call her at 5 PM today to determine her status. She apparently said nothing to the marshall to indicate that she was abandoning the jury, but no one seems to know for sure if or when she will return.

Judge Sullivan has scheduled another hearing for 6 PM Sunday. At this point the prosecution reportedly wants to proceed with an alternate juror but the defense is against it and also doesn’t want to proceed with only 11 jurors. Judge Sullivan is also opposed to going with 11 jurors in light of yesterday’s problems with Juror No. 9 (McClatchy, BLT, earlier).

Larry Reynolds of Las Vegas on Thursday became the fourth defendant to plead guilty in the Petters case, leaving Tom Petters as the only one of the five persons charged who has not pleaded guilty. As expected, Reynolds pleaded guilty to a one-count information charging him with money laundering conspiracy. Reynolds admitted that his Los Angeles firm, Nationwide International Resources, had laundered about $12 billion in investor funds since 2002. Instead of being used to buy electronics merchandise, as investors were told, it was funneled to Petters, minus a commission which earned Reynolds about $6 million over the years. He is still in custody but is negotiating with prosecutors for possible release on bond. Another bond hearing was to be held for Tom Petters on Thursday, but that has been postponed until October 31 (Star Tribune).

KSTP has obtained a transcript of defendant Robert White’s call to Tom Petters in which Petters discussing fleeing the country (story w/ video). It turns out that White, who pleaded guilty on October 8 to mail fraud and illegal monetary transactions (earlier), called Petters at the FBI’s request.

US District Judge Ann Montgomery on Wednesday ordered a freeze on the filing of civil suits at the request of court-appointed receiver Doug Kelley. Wait… she can’t do that! The same story discloses that in St. Paul, US Bankruptcy Judge Gregory Kishel is consolidating 10 bankruptcy petitions from the various Petters companies under a single case number. Does Judge Montgomery plan on interfering with bankruptcy proceedings? Remember, this is the same judge whose actions effectively prevented this enormous mess from surfacing six years ago (earlier).

After leaving early Wednesday citing stress and a need for “a minute of clarity,” the jury in the public corruption trial of Sen. Ted Stevens fared no better on Thursday. Around midday, the jury foreman sent four notes to US District Judge Emmet Sullivan, one of them demanding that Juror No. 9 be dismissed because she was “rude, disrespectful and unreasonable,” had engaged in “violent outbursts” and had refused to follow procedures (text of note). Judge Sullivan brought all the jurors in, gave them what he described as a “pep talk” and sent them back to deliberate. In the afternoon, the jurors again asked to leave early, citing exhaustion. Then Juror No. 4 told the marshal that she had to leave for Texas immediately to see a seriously ill family member. She could not be located afterwards. Judge Sullivan called an emergency session early Thursday evening, telling attorneys for both sides to have briefs to him by 7 AM Friday about the possibility of going forward with 11 jurors; he’ll hold a hearing at 9 AM (McClatchy, WaPo).

Colin Nathanson, formerly of Coto De Caza, California, on Monday pleaded guilty to six counts of wire fraud before US District Judge Cormac Carney in Santa Ana. Nathanson was president and CEO of former Orange County-based Giant Golf and Play Big Enterprises, which sold golf clubs and accessories. He admitted inducing several hundred people to invest about $28.4 million in a privately held internet technology company under false pretenses. The company, Nathanson Investment Trust, was fictitious. Instead he used the funds to prop up his golf businesses, which were losing money, and for lavish personal expenses including gambling debts.

Nathanson’s sentencing is scheduled for February 9, 2009; he faces a statutory maximum of 120 years in prison (DOJ).

Six years. Hundreds of thousands of taxpayer dollars wasted on a bogus felony prosecution. Hundreds of thousands spent by the Texas Association of Business to defend itself. And in the end, on Tuesday, the TAB pleaded guilty to a misdemeanor charge, unlawful direct campaign expenditure, and paid a $10,000 fine to make it go away. TAB admitted that it paid the salary of its president Bill Hammond when he traveled the state in 2002 in support of Republican candidates. Charges against its former lobbyist Jack Campbell were dropped. Other felony charges brought by Earle against TAB had already been thrown out by State District Judge Mike Lynch.

Ever graceless and clueless, Travis County DA Ronnie Earle claimed victory when in fact it was a repudiation of his attempt to convict the organization on felony charges. Worse, he’s still claiming that the facts supported a felony and that cost was the only reason he avoided a trial (Austin American-Statesman ).

After hearing an hour and 20 minutes of instructions from US District Judge Emmet Sullivan, the jury in the public corruption trial of Sen. Ted Stevens begin deliberating. After about four hours, they asked to leave slightly early, citing a need for “a minute of clarity;” Judge Sullivan granted the request.

In the instructions, Judge Sullivan told jurors that star prosecution witness Bill Allen’s guilty pleas in other cases have no connection to this case, and allowed jurors to consider other acts Stevens was not charged with but that were included in the testimony. He again specified to jurors what stricken evidence could not be considered but according to McClatchy, “the language in the instructions laid no blame for why the evidence wasn’t to be considered.”

Closing arguments were made on Tuesday in the public corruption case of Sen. Ted Stevens. Jurors will begin deliberations today.

Prosecutor Joseph Bottini dismissed Stevens’ explanations for not reporting renovations on his Alaska home and gifts on his financial disclosure forms, calling his claims “nonsense.” He replayed the recording in which Stevens told former VECO CEO Bill Allen that the worst that could happen to them was a little jail time, and asked “Does that sound like someone who really believes he didn’t do something wrong?”

Stevens’ attorney Brendan Sullivan told jurors that prosecutors had twisted the evidence against Stevens: “If you look at life through a filthy, dirty glass, then the whole world looks dirty.” He said that the $160,000 that Stevens paid was more than enough to cover the cost of the renovation project and that Stevens and his wife “believed they paid their debts and they didn’t think they were getting anything for free.” (McClatchy, WaPo)

Ryan McCourt and Kenneth Hartley, both former managers for McCourt Construction Company, were sentenced on October 16 by US District Judge Joseph Tauro in Boston for their roles in an overbilling scheme on Boston’s Big Dig project. Ryan McCourt was sentenced to two years probation, while Kenneth Hartley was sentenced to six months in prison and two years of supervised release. Both men pleaded guilty in July 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, admitting that they took part in overbilling the I-93 Tip O’Neill Tunnel project in a scheme where subcontractors charged journeyman labor rates for work actually done by apprentices (earlier). McCourt Construction also pleaded guilty and will be sentenced on November 7 (Boston Globe, DOJ).

Chief US District Judge Edward Nottingham of the District of Colorado has resigned effective October 29. Here’s the statement from Chief Circuit Judge Robert H. Henry posted on the Tenth Circuit website:

In response to complaints of judicial misconduct lodged in August 2007, the Tenth Circuit Judicial Council initiated misconduct proceedings against Judge Edward Nottingham. As additional allegations developed and subsequent misconduct complaints were filed, the Judicial Council expanded the initial misconduct proceedings.

The Judicial Council, through its appointed Special Committees, conducted a thorough and extensive investigation, interviewed many witnesses, considered voluminous documentation, and conducted two hearings. At this critical time in the investigation of these multiple complaints of misconduct, Judge Nottingham has stepped down, effective immediately, as Chief Judge of the District of Colorado, has ceased judicial duties, and has resigned his commission as a United States District Judge effective Wednesday October 29, 2008. The Council will have no further statement until Judge Nottingham’s resignation is effective.

9News, which broke the latest allegations involving Nottingham and a prostitute, has more, including speculation that he could face obstruction of justice charges.

UPDATE: The  US District Court has issued a statement (.pdf) on the resignation, announcing that Judge Wiley Daniel will be the new chief judge in the district.

Under cross examination Monday, Sen. Ted Stevens continued to insist that he was unaware that VECO paid for unbilled renovations on his Alaska home. Lead prosecutor Brenda Morris cited emails where he had praised a VECO employee for work done on the home, yet Stevens continued to deny that VECO as a company worked on his home. When Morris questioned Stevens about certain furniture he had received which was admittedly in the home for years, Stevens insisted that the furniture was there on loan and was not an undisclosed gift. Quote of the day, from Stevens: “We have lots of things in our house that don’t belong to us.” Closing arguments are scheduled for Tuesday and the case is expected to go to the jury on Wednesday (McClatchy, WaPo).

US District Judge Edward Nottingham, embroiled in misconduct allegations (earlier), notified the court that he will be off all week despite a scheduled caseload. He called in sick Wednesday through Friday of last week. However, there is no indication yet that he has resigned. 9News now reports that the FBI has contacted the former Bada Bing of Denver escort agency prostitute who filed a complaint with the Tenth Circuit; a criminal investigation has begun.

A longtime civilian purchasing agent with the National Geospatial-Intelligence Agency (part of the US Department of Defense) has admitted stealing $280,000 in agency funds by using his government P-Card to process phony credit card transactions through his girlfriend’s sham credit card processing business. Steven C. Brown pleaded guilty to one count of theft of public money earlier this month in US District Court in St. Louis. Brown and his girlfriend Teressa Shrum, a former exotic dancer and Hustler model, were indicted in June on 20 counts of theft of public money. Shrum pleaded not guilty; her trial is scheduled to begin on November 3. Under federal sentencing guidelines, Brown is likely to face 18 to 37 months in prison when he is sentenced on December 30 (St. Louis Post-Dispatch, DOJ).

A former paralegal at a South Windsor, Connectiut law firm has admitted embezzling more than $1.7 million from her employer to cover her gambling debts. Patricia Baddeley-Meehan pleaded guilty to two counts of mail fraud and one count of filing a false tax return earlier this month before US District Judge Stefan Underhill in Bridgeport. She had signatory authority on three major accounts at the Berman & Russo law firm and wrote checks from the firm’s client fund account over a four year period to pay off nearly $1.5 million in cash advances she had taken on her credit cards at several casinos and to fund other purchases. Her sentencing is scheduled for January 6, 2009; she faces a statutory maximum of 43 years in prison (Hartford Courant, DOJ).

Attorneys for Sen. Ted Stevens on Saturday filed yet another motion for dismissal, this time based on the same evidence already excluded from the trial by US District Judge Emmet Sullivan. Now the defense says that the billing records of two VECO employees that the prosecution knew were false were also presented to the grand jury which indicted Stevens: “Knowingly presenting false testimony to the grand jury is conduct fatal to the indictment and inconsistent with the liberties and due process rights the government is entrusted to safeguard.” (Roll Call)

On Sunday evening the prosecution responded by claiming that the defense motion quotes from grand jury testimony in violation of a direct order by Judge Sullivan that grand jury testimony not be revealed: “The Court’s Order could not have been clearer: Do not disseminate or publish the material to anyone – not defense counsel, not witnesses, not third parties, and certainly not the public at large.” (Roll Call)

Larry Reynolds of Las Vegas, who was arrested in California on October 3 and charged with mail fraud and money laundering in connection with the Petters case (earlier), is apparently on the verge of becoming the fourth defendant to plead guilty. The Star Tribune reports that prosecutors have now filed an information charging him with one count of money laundering conspiracy, indicating that a plea agreement is imminent.

Frank Vennes Jr., the supposedly reformed con man who is also under investigation in the case (earlier), has been allowed to have his frozen assets separated from the others and assigned to a different receiver. He has not been charged.

As a result of the August 1 ruling by the US Court of Appeals for the Third Circuit in the Cyril Wecht case (earlier), Chief US District Judge Donetta Ambrose of the Western District of Pennsylvania has revoked her 2006 rule that kept juror names secret. Although the Third Circuit decision only specifically addressed the bizarre rulings of US District Judge Arthur Schwab, it also said that an anonymous jury goes against American judicial tradition. Judge Ambrose decided that meant that juror names should no longer be protected (Pittsburgh Post-Gazette).

Sen. Ted Stevens spent all day Friday on the witness stand. Under direct examination, he reiterated the defense’s theme that his wife was in charge of the bill paying and renovations to their Alaska home since he was too busy and that he was unaware of any unbilled work on the home. He called key prosecution witness Bill Allen’s testimony that Stevens knew he was getting work done for free “just an absolute lie.” But on cross examination he told lead prosecutor Brenda Morris that Allen “was a good friend and I trusted him.” As Morris continued to grill him about inconsistencies, Stevens got progressively crankier and accusatory, at one point telling her “I think you better rephrase your question; your question is tautological.” Will the jury understand that?(MSNBC, McClatchy)

Chief US District Judge Edward Nottingham of Denver is reportedly resigning under pressure, possibly as early as today. Nottingham has been the subject of prior misconduct complaints and in March was removed from the case of former Qwest CEO Joe Nacchio (more).

The latest allegations against Nottingham involve a former prostitute who claims the judge asked her to lie to investigators and not tell them he paid her for sex. Last Friday she filed a written complaint with the US Court of Appeals for the Tenth Circuit. According to 9NEWS:

The former prostitute claims he initially paid her $300 an hour for sex, but became a VIP member after 25 visits and was then only charged $250 an hour for his weekly sexual visits.

This frequent flier discount was given by the (I’m not making this up) Bada Bing escort agency, where the woman worked in 2003 and 2004. Nottingham’s name also appeared on a list of clients from Denver Players, an alleged prostitution operation raided early this year. The Rocky Mountain News has more.

Sen. Ted Stevens spent 20 minutes on the witness stand late Thursday, denying that he ever intentionally filed false disclosure forms. He will apparently be the last defense witness. His attorney Brendan Sullivan plans to question him for at least two more hours Friday morning.

His wife Catherine Stevens testified earlier, asserting that she was the one who oversaw the renovations on their Alaska home because the Senator was too busy. She said the assumed that two VECO employess who worked on the house were being paid by Rocky Williams of Christensen Builders. Williams is the prosecution witness who was mysteriously shipped back to Alaska by the prosecution at the last minute.

(McClatchy, Reuters)

Texas’ Third Court of Appeals Chief Justice Ken Law has denied Justice Jan Patterson’s allegation that he refused to let her file a dissent to the court’s ruling last week denying Travis County DA Ronnie Earle’s latest attempt to subvert the Court’s earlier ruling in the cases of Tom DeLay associates John Colyandro and Jim Ellis (earlier).

In a reply filed Monday with the Texas Supreme Court, Law said he acted because Patterson refused to follow the court’s internal procedures which call for circulating the opinion among colleagues first to allow them to respond:

“Justice Patterson’s dissenting opinion is currently in circulation at the court and will be released together with any other opinions in the matter upon completion of that process … It is well-settled that a court of appeals may maintain internal administrative rules regarding … issuance of opinions.”

The court already refused Earle’s motion to rehear its August 22 decision en banc; the motion denied last week was Earle’s attempt to get the court to reconsider its previous refusal on grounds that Justice Alan Waldrop was biased and should have recused himself. Give it up, Ronnie.

US District Judge Ann Montgomery ordered the seizure of the Petters companies’ assets at the DOJ’s request and has frozen the personal accounts of individuals charged or under suspicion. But according to a St. Paul Pioneer Press article, she repeatedly thwarted an investor’s attempt to obtain $1.3 million he says was stolen from him by Petters Company, Inc.

Richard Hettler, who started investing with Petters in 1997, claims PCI gave him two hot checks totaling that amount in January 1998 in payment of promissory notes. He sued in 2002 but Montgomery not only dismissed it, she barred him from filing further lawsuits over the notes. In 2005, when Petters announced that he was buying Polaroid, Hettler went public with his accusations, only to have Montgomery grant a restraining order against him at Petters’ request. And in Decemeber of 2006, Montgomery granted a Petters motion to hold Hettler in contempt of court for posting “inflammatory” material online, and ordered the material removed.

There’s much more; read the whole story here.

When we last visited the Ronnie Earle dog-and-pony show, the Travis County DA had filed a motion asking Texas’ Third Court of Appeals to reconsider its August 22 ruling (earlier) by a three-judge panel of the Court in the cases of Tom DeLay associates John Colyandro and Jim Ellis. The Court has already refused an en banc rehearing.

Earle’s target is Justice Alan Waldrop, who wrote the decision. That’s because Waldrop, before he was elected to the court, once dared to call a civil lawsuit against Colyandro and Ellis “politically motivated.” At the time, Waldrop was representing Texans for Lawsuit Reform, which met with Colyandro during the 2002 US congresional campaign. In the Dudley Do-Right world of Ronnie Earle, that’s prima facie evidence of corruption.

Waldrop has refused to recuse himself. And last week, the Third Court denied Earle’s motion without further explanation. Now Justice Jan Patterson, one of the Court’s two Democrats, has accused Chief Justice Ken Law of refusing to file her dissent to that ruling. Last Friday, she asked the Texas Supreme Court to intervene in the matter. Her filing claims that after she announced her intention to file a written dissent, Law instructed the court clerk not to file it. Will the Texas Supreme Court choose to get involved? Apparently there’s no state law or court rules discussing the right to file a dissent.

Bob Persons, a neighbor who looked after Sen. Ted Stevens’ Alaska home, testified on Wednesday that he never told former VECO CEO Bill Allen not to send Stevens a bill for the renovation work VECO performed on the home. Allen, the government’s key witness, previously testified that Persons told him “Ted’s just covering his ass” by requesting a bill.

Augie Paone, a carpentry contractor, testified that Allen told him to “eat” a bill for about $13,400 of work he did on the home rather than send the bill to Stevens, and to regard it as a political contribution. He said it would have been “business suicide” to disregard Allen’s wishes. On cross examination, Paone conceded that he later did more work on the home which he billed to VECO, and acknowledged that it was work that would have been noticed by Stevens.

Both Sen. Stevens and his wife Catherine are expected to testify today.

(ADN/McClatchy, Reuters)

Jury selection began Tuesday in US v. Stein et al, the tax shelter fraud trial which once had 19 defendants, including 17 former KPMG partners. What once promised to be the largest tax fraud trial ever now has four defendants remaining: former Sidley Austin LLP law partner R. J. Ruble and former KPMG LLC partners David Greenberg, John Larson and Robert Pfaff. Two of the original defendants pleaded guilty. US District Judge Lewis Kaplan in July 2007 dismissed the indictments of 13 other KPMG partners in a decision with far-reaching implications (earlier here and here). Last month Kaplan refused to dismiss the remaining indictments. The trial is expected to last three to four months (NYT, Reuters).

WCCO’s Esme Murphy reports that the assets of Tom Petters’ co-defendants have now been frozen by a federal judge. That would be US District Judge Ann Montgomery, who previously froze the assets of the Petters companies and Tom Petters personally. Attorney (and former AUSA) Doug Kelley, the court-appointed receiver, will be handling all the accounts.

The story identifies the co-defendants as Deanna Coleman, Robert White, James Wehmhoff, Larry Reynolds, Michael Catain and Frank Vennes. However, although Wehmhoff and Vennes were identified in the FBI affidavit, to our knowledge they have yet to be charged.

Meanwhile, Tom Petters’ attorney Jon Hopeman said he expects a grand jury indictment to be handed down early next month (Star Tribune).

US District Judge Emmet Sullivan on Tuesday denied a defense motion (earlier) to quash a DOJ subpoena from September 15 demanding emails and other documents from Mayer Brown LLP, where Stevens’ wife, Catherine Stevens, is a partner. Although the prosecution has rested, Catherine Stevens is listed as a potential defense witness. If there’s anything in those documents that could be problematic on cross examination, it could put the brakes on defense plans to have her testify.

Sen. Orrin Hatch (R-Utah) testified on Tuesday as a character witness, calling Stevens “one of the true lions of the Senate” and “totally honest, totally straightforward.” Hatch admitted on cross examination that he was unfamiliar with the case. Stevens said that he intends to take the stand, possibly as early as today. The defense could rest as early as late today or Thursday and the case could go to the jury by next Tuesday.

(Reuters, Anchorage Daily News)

As expected (earlier), former Enron Broadband Services division CEO Joseph Hirko pleaded guilty on Tuesday to one count of wire fraud, admitting that he misled investors at Enron’s January 2000 analyst conference by announcing that a new operating system on Enron’s broadband network was completed when it was actually still under development. Hirko agreed to serve a prison sentence of 12 to 16 months; he will also forfeit $7 million in cash and $1.7 million in deferred compensation to the government, which represents what he gained when stock prices rose following the announcement. US District Judge Vanessa Gilmore scheduled his sentencing for March 3, 2009 (Houston Chronicle).

Gregory King of Fairfield, California was sentenced last week to two years in prison by US District Judge Lawrence Karlton in Sacramento. He was also ordered to pay over $69,000 in restitution. On June 10 King pleaded guilty to two counts of transmitting code to cause damage to a protected computer (earlier). He admitted operating a 7,000-computer botnet and using it to launch distributed denial-of-service (DDoS) attacks against the Killanet and CastleCops forums. He was caught in the DOJ and FBI’s “Operation Bot Roast” operation (DOJ).

The Houston Chronicle’s Kristen Hays reports that former Enron Broadband Services division CEO Joseph Hirko is expected to plead guilty on Tuesday to a single count of wire fraud before US District Judge Vanessa Gilmore in Houston. The plea agreement calls for Hirko to serve 12 to 16 months in prison. Hirko and former broadband divison software executive Rex Shelby were scheduled to be retried starting December 1 (earlier). The two men and three others were accused of deceiving investors in connection with a failed broadband venture. Hirko, Shelby and former division strategic planning executive Scott Yeager were tried in 2005 and acquitted on some counts, but the jury deadlocked on other counts. Gilmore refused to dismiss those counts. Shelby is still scheduled for trial in December, while Yeager’s retrial is set to begin on January 12, 2009.

Petters Company Inc. (PCI) and Petters Group Worldwide filed for Chapter 11 bankruptcy in petitions filed Saturday night by attorney Doug Kelley, the court-appointed receiver. PCI is the entity directly involved the fraud allegations; Petters Group Worldwide is the parent of the various Petters-owned or controlled businesses, including Polaroid and Sun Country Airlines (Star Tribune). Sun Country filed Chapter 11 earlier last week.

Cheryl Mau, VP of marketing for Polaroid, said yesterday that Polaroid will “continue to build and ship product,” indicating that the company’s plans haven’t changed. And perhaps Polaroid will be unaffected. But the now-released FBI affidavit (.pdf) lists Polaroid CEO Mary Jeffries as the recipient of $1 million in PCI assets in December 2007 from one of the accounts allegedly involved in the fraud. Jeffries was previously COO and President of Petters Group Worldwide until being named to the Polaroid post in April 2008. Former Polaroid CEO Thomas Beaudoin and another Polaroid employee also appear on the list of recipients (pp. 20-21). Stay tuned.

UPDATE/CORRECTION: Contrary to what we posted earlier, Fingerhut is not presently controlled or owned by Petters Group Worldwide. As explained in this press release: “[Fingerhut] is not dependent for any funding from Petters Group Worldwide or any of its affiliates (PGW) and hasn’t been since February 2004. PGW is a minority, passive stockholder, and has not been involved in the day-to-day operations of the company since that time.”

Two former executives of Seattle-based privately held software company Entellium Corporation were charged with wire fraud on October 8 in US District Court in Seattle: Paul Thomas Johnston, former CEO, and Parrish Jones, former CFO. The two men founded the company in 2004. Entellium makes and sells programs which help companies track sales and customer information.

Johnston and Jones allegedly grossly overstated revenue from the beginning in order to attract about $50 million in private investment funds, including $19 million from Ignition Partners, a Bellevue,Washington venture capital firm. Late last month a human resources VP discovered the alleged fraud, which led to a quick resignation by Johnston and Jones. An attorney for the company reported it to the FBI (PC World, DOJ).

The fraud trial of former National Century CEO and co-founder Lance Poulsen is recessed until October 20 due to prior commitments by US District Judge Algenon Marbley. The government’s key witness, former Executive VP for Compliance Sherry Gibson, testified on Thursday and Friday that she had falsified records at Poulsen’s specific request “report by report, and sometimes line by line” dating all the way back to 1992. Among other things, she said she was told to show falsify the balances shown in the company’s reserve accounts, and she explained how the company would deceive auditors by creating false backup reports and by varying audit dates for different entities in order to shuffle funds between accounts.

Gibson pleaded guilty in 2003 to one count of conspiracy to commit securities fraud and agreed to cooperate with prosecutors; she was sentenced to 48 months in prison in June 2004. She was the government’s star witness in the trial of five other executives who were convicted in March, and also in the March trial of Poulsen and his associate Karl Demmler for witness tampering. They were convicted of trying to bribe her to change her testimony; Poulsen was sentenced to 10 years in prison in August in that case.

Earlier in the week, FBI Special Agent Jeffrey Williams testified that investigators discovered $1.3 billion in unsecured loans to companies owned or controlled by Poulsen and other National Century principals.

(Columbus Dispatch, Columbus Bizjournal)

Attorneys for Sen. Ted Stevens on Saturday filed a motion to quash (.pdf) a DOJ subpoena from September 15 demanding emails and other documents from Mayer Brown LLP, where Stevens’ wife, Catherine Stevens, is a partner. Prosecutors want emails between the Senator and Mrs. Stevens as well as her correspondence with 37 other people and companies regarding anything of value that may have been provided to the couple. Stevens’ attorneys called the government’s renewed request for more documents “a last-minute fishing expedition” and impermissibly overbroad. The motion also claims that any communications between the Senator and Mrs. Stevens are privileged. The trial resumes Tuesday (Anchorage Daily News).

Friday developments in the public corruption trial of Sen. Ted Stevens:

• US District Judge Emmet Sullivan ruled that the defense is limited to five character witnesses.
• Former Secretary of State Colin Powell on Stevens: “As we say in the infantry, this is a guy you would take on a long patrol.” On cross-examination, Powell admitted that he had never visited Stevens’ Alaska home and was unfamiliar with the case.
• The principals of two construction businesses that performed work on Stevens’ Alaska home testified that all bills were paid promptly and never ignored.
• A private appraiser and two assessors with the Municipality of Anchorage testified that the value of Stevens’ home after the renovations could not have equaled the value the government claims Stevens received in free labor and gifts.

(CQ Politics, McClatchy)

Although US District Judge Emmet Sullivan on Wednesday tossed out the time card records of VECO employee Dave Anderson, saying the government knew they were falsified, he did allow Anderson to testfy on Thursday about the work he did on Sen. Stevens’ home. Anderson, nephew of former VECO CEO Bill Allen, said he was at the home as many as six days a week during parts of 2000 and 2001. But he also said that Stevens wasn’t around much and that the renovation was “basically Bill’s thing. Bill [Allen] wanted to do it, take care of Mr. Stevens.”

The defense did not cross examine Anderson; the prosecution rested. Judge Sullivan rejected the prosecution’s plea to not issue jury instructions which will explain to the jury that the time records are being tossed out due to government misconduct; he also denied the defense’s motion for acquittal.

The defense’s first witness was Stevens’ longtime colleague Sen. Daniel Inouye (D-Hawaii), who testified to Stevens’ good character: “I can assure that his word is good, as far as I’m concerned, it’s good enough to take to the bank.” Former Secretary of State Colin Powell is expected to testify on Friday.

(CQ Politics, Politico, McClatchy)

A three-judge panel of Texas’ Fourth Court of Appeals on Wednesday unanimously upheld the conviction and sentence (.pdf) of suspended attorney Ted H. Roberts of San Antonio. Roberts was convicted in March 2007 on three counts of theft by deception and coercion and sentenced to five years in prison; he was acquitted on two other counts. His wife Mary, also an attorney, was convicted on five counts at her trial and sentenced to 10 years probation. Ted Roberts was accused of using Rule 202 petitions threatening civil litigation to coerce payments from men who had affairs with Mary; the deception was telling them the money would go to charity when it actually went to him and his wife. Roberts’ primary argument was that his actions were lawful and that the petitions were legally valid. Justice Alma Lopez, who wrote the opinion, stated: “We fail to see how Roberts’s use of his law license to draft Rule 202 petitions in his efforts to get the men to ‘contribute to his favorite charity: me’ converts criminal extortion into lawful conduct.” Roberts has been free on bond pending appeal; his attorney indicated he would probably continue his appeal (Express-News).

On Monday in Raleigh, US District Judge W. Earl Britt sentenced former Brunswick County (Cape Fear area) Sheriff Ronald Hewett to 16 months in prison for obstructing a federal grand jury investigation into allegations of corruption in his department. Hewett pleaded guilty on June 2 to a one-count information charging him with obstruction of justice (earlier). On December 2006 the federal grand jury began investigating allegations that he had deputies perform manual labor on his property, demanded that deputies campaign for him and failed to prosecute prominent residents. After the grand jury subpoenaed 25 former and current sheriff’s office employees last June, Hewett reportedly harrassed, threatened and intimidated them before and after their grand jury testimony. He resigned this April 15 after being suspended March 27 and indicted March 31 on state charges of embezzlement and obstruction. He still faces the state charges, but District Attorney Rex Gore said he was waiting for the federal sentencing before deciding whether to proceed (Wilmington Star-News, DOJ).

US Magistrate Judge Jeffrey Keyes in St. Paul on Wednesday denied bond for Tom Petters, saying “He has the personality to pull off a flight caper.”

In the same courthouse, three Petters associates pleaded guilty:

• Faux wholesaler Michael Catain, as expected, pleaded guilty to money laundering conspiracy.
• Consultant and former PCI officer Robert White pleaded guilty to counts of mail fraud and illegal monetary transactions. White said the fraud “exceeded $3 billion.”
• Deanna Coleman, former vice president of operations for PCI, pleaded guilty to one count of conspiracy to commit mail fraud. Coleman formally acknowledged that she was the cooperating witness who went to the FBI and wore a wire.

Judge Keyes called the scheme “one of the greatest frauds in American history.” Colemn’s attorney alled it “an astronomical fraud.” According to another report, the FBI had no inkling until Coleman came forward on September 8. Yet one month later, and only five days after Petters and White were arrested, three principals have pleaded guilty. Will Tom Petters risk a trial? Not likely.

Jayrece Turnbull, niece of DC Tax Office fraud ringleader Harriete Walters, pleaded guilty on Tuesday before US District Judge Alexander Williams in Greenbelt, Maryland to receipt of stolen property, conspiracy to commit money laundering, tax evasion, and mail fraud in connection with the $48 million fraud scheme. Walters pleaded guilty last month (earlier). More than $24 million in fraudulent tax refund vouchers were routed through accounts controlled by Turnbull over a 6 year period. Her sentencing is scheduled for February 4, 2009. All other defendants have now pleaded guilty (WaPo, DOJ).

In Los Angeles on Tuesday, US District Judge John Walter sentenced Howard Vogel to three months in prison for his role in the Milberg Weiss kickback scheme. Vogel pleaded guilty in in August 2006 to one count of making a false statement in federal court. He admitted acting as a paid plaintiff or having a relative act as a plaintiff in 40 different class action lawsuits brought by the firm over a 14 year period. As part of his plea agreement, Vogel forfeited $2 million and paid $550,000 in back taxes (National Law Journal).

The latest twists and turns in the public corruption trial of Sen. Ted Stevens:

In motions filed Wednesday night, prosecutors asked US District Judge Emmet Sullivan not to issue instructions to the jury, while attorneys for Stevens asked for acquittal.

Earlier Wednesday, Judge Sullivan refused the defense’s latest motion for dismissal or a mistrial, but he did throw out certain evidence: time card records of two VECO employees who allegedly worked on Stevens’ Alaska home and evidence about the value of a Land Rover which former VECO CEO Bill Allen traded to Stevens in 1999. Judge Sullivan said prosecutors knew the VECO time card records were falsified and that prosecutors failed to turn over a check which established the cost of the Land Rover.His comment: “Something smells here.”

In Wednesday testimony, prosecutors sought to show that Stevens was closely involved in the renovation to his home and in his own finances.

(Politico, WaPo, CQ Politics)

Tuesday’s developments in the giant but fast-moving Petters fraud story:

Michael Catain, owner of one of the sham companies represented to investors as a wholesale supplier in the scheme, was charged last Friday with money laundering. He is expected to plead guilty to money laundering conspiracy on Wednesday afternoon in US District Court in St. Paul.

The Tuesday afternoon bond hearing for Tom Petters lasted three hours; US Magistrate Judge Jeffrey Keyes will announce his decision on Wednesday morning. The Star Tribune reports that secretly recorded tapes played at the hearing contain damning admissions by Petters, including this: “The only thing that makes me think there is some divine intervention [is that] when it gets down to it, there is no possibility we could have got away with this for so long.”

The testimony of the government’s star witness, former VECO CEO Bill Allen, ended Tuesday. Allen’s attorney Robert Bundy, who was booted from the courtroom at the end of Monday’s session when US District Judge Emmet Sullivan accused him of coaching Allen’s answers, was not in the courtroom on Tuesday. On cross examination, Stevens’ attorney Brendan Sullivan accused Allen of coloring his testimony to protect his company and his children as part of his plea agreement.

Jurors heard more taped conversations, this time between Allen and Bob Persons, a neighbor who looked after Stevens’ Alaska home. They discussed arrangements for Allen to pay contractor bills. The prosecution’s last witness will testify Wednesday. Judge Sullivan indicated he would then hear the defense’s latest motion to dismiss (CQ Politics).

Israeli national Ehud Tenenbaum, a/k/a “The Analyzer” of Pentagon hacking infamy who was charged last month in a $1.8 million fraud scheme in Canada (earlier), was ordered held without bond on Friday by a judge in Calgary on a US extradition warrant. The order came a day after he was granted bail on the Canadian charges, but he was rearrested before he ever left the remand facility where he was being held. The US allegations involve “potentially hundreds of financial institutions in Russia, Turkey, the Netherlands, Sweden, Belgium, Germany and other countries.” (Calgary Sun, Haaretz)

Gerald McAfee on Monday made his first court appearance in US District Court in Los Angeles on charges that he stole $1.6 million from College Hospital of Downey in 1985. Working as an accountant for the hospital, using an assumed identity, he allegedly talked officials into giving him control of the funds for reinvestment, then fled the country with the loot. He was indicted in absentia in 1987 on charges of bank fraud, mail fraud, wire fraud and interstate transportation of securities taken by fraud. Last year he was arrested in Thailand where he had been living under another name. To no one’s surprise, he has been ordered held without bond pending trial (LA Times).

US District Judge Emmet Sullivan allowed the trial to continue and deferred until Tuesday or Wednesday a hearing on the defense’s latest motion to dismiss. Jurors heard recorded conversations between Sen. Stevens and key witness Bill Allen; RetireTed has sound files of excerpts from the conversations. While Stevens did mention the possibilty of jail time on one of the tapes, he also insisted that he and Allen had done nothing wrong.

On cross examination by Stevens’ attorney Brendan Sullivan, Allen admitted that he never tried to bribe Stevens and acknowledged that Stevens wanted to pay for everything he got. Cross examination of Allen will continue Tuesday.

ABC News reports that Judge Sullivan noticed during Allen’s testimony that Allen’s attorney Robert Bundy was giving hand signals to coach his answers. After Allen’s testimony for the day ended, Judge Sullivan called Bundy to the dais, threatened him with contempt of court and ordered him out of the courtroom. McClatchy has more trial coverage.

US District Judge Ann Montgomery on Monday issued an order seizing the assets of Petters Group Worldwide, Petters Co. Inc. and most other Petters-related companies. Attoney Doug Kelley, a former AUSA, was appointed receiver. How this will track with the Illinois state court order issued on Friday (earlier) remains to be seen, but the federal seizure seems likely to prevail (Star Tribune). The order excludes Petters Aviation, operator of Sun Country Airlines, which filed Chapter 11 bankruptcy on Monday (Reuters).

Two more individuals have been charged: Deanna Coleman, a Petters employee, was charged with conspiracy on Monday for allegedly fabricating documents used by Petters. Michael Catain, listed as owner of one of the allegedly sham wholesale companies, was charged with money laundering (Pioneer Press). At least one source claims that Coleman is the cooperating witness who was wired by the FBI.

Testimony to date in the fraud trial of former National Century CEO Lance Poulsen has centered on how investors were allegedly deceived by the company’s accounting practices. National Century represented to investors that it was buying valid and collectible receivables from health care providers in exchange for cash to pay their bills. The receivables were packaged as bonds which were sold to investors. However, both former director of securitization Jon Beacham and former associate vice president of funding Jessica Bily both testified that National Century never actually purchased the receivables from six providers and instead deliberately overfunded them as part of a scheme to enrich Poulsen and two other principals, who controlled the six providers. Bily said that Poulsen ordered her to make false entries in the official books to make it appear that these were legitimate. Bily also testified that the scheme was going on as long ago as 1994. National Century collapsed in 2002 (Columbus Bizjournal, Columbus Dispatch).

Attorneys for Sen. Ted Stevens late Sunday night filed a new motion for a mistrial or dismissal of charges. The latest motion is based on new information they received late Friday after US District Judge Emmet Sullivan ordered prosecutors to turn over more evidence including rough FBI notes (earlier). The latest motion alleges intentional misconduct by prosecutors, claiming they got key witness Bill Allen to change his statement after they learned of his statements which were favorable to Stevens. The government’s response is due today (NYT).

UPDATE:

Motion To Dismiss

Government’s Initial Opposition To Motion

It just keeps getting bigger: a group of lenders on Friday obtained an order appointing William Procida, Inc. of New Jersey as court receiver to oversee Petters holdings. The order was issued in state court in Cook County, Illinois. Procida claims to represent lenders holding over $3 billion in loans to Petters companies. Lancelot Investment Management a hedge fumd out of Northbrook, Illinois, acknowledged it has lent $1 billion to Petters Group Worldwide. Another hedge fund, Nevada-based Palm Beach Finance, admits lending $1.1 billion to Petters. (Bloomberg, Star Tribune).

A “reformed” con man who turned to religion and became involved in Christian charitable work has been identified as one of the parties whose house was raided by the FBI in the investigation. Frank Vennes Jr. has not been charged but the search warrant affidavit identifies him as “a facilitator who persuaded five major investors to invest $1.2 billion in companies controlled by Petters” and he has allegedly been involved in the scheme all along.

Twin Cities businessman Tom Petters, implicated in a multi-billion dollar fraud scheme (earlier), was arrested this morning after a criminal complaint was filed late Thursday charging him with mail fraud, wire fraud, money laundering and obstruction of justice. He is scheduled to be arraigned this afternoon before US Magistrate Judge Franklin Noel. From CBS afiliate WCCO:

Sources tell WCCO-TV that FBI officials arrested Petters, who had been under constant FBI surveillance for the last week, because they learned he was preparing to flee the country.

The Star Tribune previously reported that the affidavit for the search warrants executed last week said that Petters “talks about fleeing the country and creating fabricated defenses if the fraud scheme is discovered.” Good luck on that bond, Tom.

Another Petters associate, Larry Reynolds of Las Vegas was also charged with the same offenses. He was arrested Friday in California. Petters consultant and former officer Robert White was charged Tuesday with mail fraud and money laundering.

UPDATE: Tom Petters is jailed without bond pending a detention hearing which is now scheduled for Tuesday at 2 PM (Star Tribune). Here’s the government’s motion (.pdf), which describes the alleged flight risk and alleges that Larry Reynolds also planned to flee.

Initial reports on the developing Tom Petters fraud scheme story (earlier) only mentioned one investor, Fidelis Foundation, a 501(c)(3) charitable organization. Now more information is emerging. The St. Paul Pioneer Press reports that Interlachen Capital Group, a Twin cities-based hedge fund manager, has sued Petters Worldwide and PCI in US District Court. The lawsuit (.pdf) reveals that the fund had invested $60 million purportedly collateralized by televisions which turned out to be imaginary. Sources report that hedge funds played a role in uncovering the scheme.

The Star Tribune reports that Gottex Fund Management of Lausanne, Switzerland has an estimated $300 million invested with Petters and that Northwater Market of Toronto has an undisclosed amount invested; both have warned clients.

In addition, Acorn Capital Group sued (.pdf) Petters on August 14 in the Southern District of New York, alleging default on over $273 million in loans, $259 million of which had been resold to seven other noteholders. The suit alleges that Petters personally guaranteed $50 million.

We recently noted Zach Scruggs’ ludicrous attempt to redefine his disbarment. On Thursday, the Mississippi Supreme Court rejected his motion:

EN BANC
2008-BD-00486-SCT

The Mississippi Bar v. David Zachary Scruggs; Disposition: Motion for rehearing filed by David Zachary Scruggs is denied. Easley, Graves and Randolph, JJ., would grant.

Is this the end of the matter? Or will Zach file a new motion disputing the meaning of “denied”?

(h/t folo)

Breaking: lead prosecutor Brenda Morris has admitted the government “made a gross error” in failing to disclose potentially exculpatory evidence to Sen. Ted Stevens’ attorneys. Former VECO CEO Bill Allen said he believed that Stevens would have paid for the renovations to his Alaska home if Allen had ever billed him, but his statement was not revealed to the defense until late yesterday afternoon or early this morning. US District Judge Emmet Sullivan’s response: “It strikes me that this was probably intentional. I find it unbelievable that this was just an error.”

Judge Sullivan stopped testimony and set a hearing for 4:30 today to consider defense motions for a mistrial or dismissal.

(WaPo, Roll Call, Bridge To Justice)

Former VECO CEO Bill Allen continued his testimony Wednesday in the public corruption trial of Sen. Ted Stevens, focusing on the renovations to Stevens’ Alaska home and confirming that VECO paid for the materials and labor. He also described a number of instances in which Stevens had helped VECO’s business.

Allen read a note Stevens had sent him in 2002 thanking him for the work on his house. It stated, in part: “You owe me a bill… Friendship is one thing, compliance with the ethics rules entirely different.” However, Allen said that Bob Persons, a neighbor who had helped oversee the project, later told him that the note was a ruse: “Don’t worry about getting a bill, Ted’s just covering his ass.” Allen’s testimony continues Thursday.

(McClatchy, CQ Politics)

Convicted Illinois developer and Democratic fundraiser Tony Rezko may be talking to prosecutors in the hopes of reducing his sentence. The Chicago Tribune and AP report that he has been visiting the federal courthouse and that several attorneys have reported that prosecutors have called them with details only Rezko would know. Rezko was convicted in June on 16 counts including mail fraud, wire fraud, money laundering and aiding and abetting bribery, and acquitted on eight other counts (earlier). His sentencing was scheduled for September 3 but has been moved back to October 28.

On Wednesday, US District Judge Amy St. Eve froze $105,000 of Rezko’s $380,000 in bond money, an indication that she plans to grant the prosecution’s request to order asset forfeiture (Chicago Trib/AP).

Twelve jurors and four alternates were selected on Wednesday in the fraud trial of former National Century CEO Lance Poulsen, with opening arguments scheduled for Thursday morning. (Columbus Bizjournal). Poulsen’s defense team will have one tactical advantage not available to his co-defendants who were convicted in March: since then, the SEC has put some of the blame on other parties. As the Columbus Dispatch pointed out:

The Securities Exchange Commission found Bank One and JPMorgan Chase, which now owns Bank One, culpable for negligent conduct while serving as National Century’s bank trustees.

The SEC has made similar findings with accounting firms PricewaterhouseCoopers and Deloitte & Touche while auditing National Century.

Still, Poulson faces long odds, and he has the additional problem of the tape recordings that sunk him in his witness tampering trial.

Former CIA executive director Kyle “Dusty” Foggo, once the agency’s third-ranking official, on Monday pleaded guilty to one count of honest services wire fraud. He admitted using his position to help his buddy Brent Wilkes, owner and founder of defense contractor ADCS, get fat defense contracts. From the DOJ Press Release (via Market Watch):

Throughout the years-long scheme, Foggo had a standing offer for a high-level, high-paying position with his best friend Brent Wilkes (who is currently serving a 12-year sentence imposed following his conviction in the Southern District of California for bribing former Congressman Randall “Duke” Cunningham). Foggo admitted that he allowed Wilkes to conceal their close relationship by adopting false cover stories regarding their relationship and using “straw men” and shell companies to conceal Wilkes’s interest in CIA contracts. As described in the indictment, Foggo caused the CIA to enter into these lucrative contracts without disclosing his interests.

The plea agreement follows a superseding indictment in May which piled on more counts (earlier), but Jerry Markon’s Washington Post article (here) suggests that Foggo got a good deal after his defense team threatened to introduce highly sensitive intelligence information if the case went to trial. Foggo’s sentencing is scheduled for January 8, 2009 before US District Judge James Cacheris in Alexandria; prosecutors are recommending no more than 37 months in prison.

Although he has not yet been indicted, Tom Petters on Monday resigned as CEO and Chairman of Petters Group Worldwide in the wake of the emerging investigation of a massive fraud scheme at his equity company, PCI (earlier). He announced that effective immediately he will no longer be involved in any of the operations of the parent company or its subsidiaries, which include Polaroid, Fingerhut and Sun Country Airlines (Star Tribune).

On Tuesday, Robert White, a former officer and current consultant to Petters, was charged with mail fraud and money laundering in connection with the operation. He allegedly created the phony purchase orders that were used to lure investors (AP/StarTribune ).

Jury selection begins today in Columbus before US District Judge Algenon Marbley in the fraud trial of Lance Poulsen, former CEO and co-founder of National Century Financial Enterprises. Poulsen faces one count of conspiracy, one count of wire fraud and money laundering conspiracy, four counts of concealment of money laundering and six counts of securities fraud in connection with the company’s 2002 collapse; the loss to investors has been estimated at anywhere from $1.9 billion to as much as $3 billion.

Five of Poulsen’s co-defendants have already been convicted, and four have been sentenced to prison (here and here) with the fifth, Rebecca Parrett, still at large. Poulsen’s trial was separated after he and an associate were charged with witness tampering for trying to bribe the prosecution’s star witness. Both were convicted; Poulsen has been sentenced to 10 years in prison in that case.

(Columbus Dispatch, Columbus Bizjournal)

Ten residents of Israel were indicted on Friday in US District Court in Manhattan in connection with a lottery telemarketing scheme which allegedly bilked elderly US residents out of more than $2 million. Nine have been arrested in anticipation of extradition; one is at large. Each faces two counts of wire fraud and one count of conspiracy. The scheme was said to be a boiler room operation in which the victims were notified by operators claiming to be from a New York law firm that they had won large amounts of money in an international sweepstakes and told that they needed to wire thousands of dollars to accounts in Israel to cover fees and taxes. No such prizes were awarded, the sweepstakes never existed. There are allegedly hundreds of victims who wired as much as $40,000 in the hopes that somehow they were going to get rich from a sweepstakes they had never entered (DOJ, Jerusalem Post).

Tuesday’s testimony in the public corruption trial of Sen. Ted Stevens included the beginning of testimony by the prosecution’s key witness Bill Allen, the former CEO of VECO, the now-defunct oilfiled services company at the center of most of the Alaska corruption cases. There was not enough time to begin Allen’s testimony on renovations at Stevens’ Alaska home, but he did describe their long friendship and how Stevens approached him in 1999 and asked him to install a backup generator at the house, apparently because Stevens was concerned about Y2K predictions. The generator cost about $6,000 and Allen said that to his knowledge, Stevens had never paid VECO for the installation (McClatchy).

Earlier, Stevens’ former press secretary Courtney Boone said she “tried to get the story to go away” when a reporter questioned her in 2004 about the renovations. She described how she tried to delay responding to the reporter, Heather Reicz, in the hope that she would back off, and how Stevens referred her to his wife instead of responding to the inquiry. Reicz testified that she “closed the file and threw up my hands” after concluding that she wasn’t going to get a straight answer (CQ Politics).

It’s beginning to look like Sen. Ted Stevens’ best defense may be just to sit tight and watch the prosecution’s case unravel. Late Sunday night Stevens’ attorneys filed an emergency motion seeking dismissal of the charges or a mistrial on grounds that the government withheld exculpatory evidence. The move came after they learned the prosecution had sent home one of its witnesses without having him testify. The witness’ proposed testimony allegedly did not support the government’s case concerning renovations to Stevens’ Alaska home. Stevens is charged with intentionally failing to disclose the value of the renovations. The defense contends that the witness, Rocky Williams, would have testified that he spent a lot less time on the renovation than the government claims and that Stevens “expressed little interest in the renovations other than a desire to keep his wife happy.” Williams contacted the defense team but they contend that prosecutors blocked them from meeting with him and then sent him home to Alaska with an unspecified health problem.

This infuriated US District Judge Emmet Sullivan, who said he was flabbergasted and peeved that Williams was sent home without informing the court or the defense, telling prosecutors “somebody better do some explaining.” He declined to grant the defense motion at this time but will reopen earlier testimony to allow more cross examination of VECO bookkeeper Cheryl Boomershine, whose Friday testimony concerned the hours Williams allegedly spent on the renovation project. Williams may not be able to return, and as of late Monday Judge Sullivan had not decided how to handle that issue.

Former VECO CEO Bill Allen, the government’s key witness, was expected to take the stand on Tuesday In light of Monday’s developments, his testimony may be delayed.

(WSJ, NYT, Politico)

Attorney General Michael Mukasey on Monday announced the appointment of Nora Dannehy, US Attorney for Connecticut, as special prosecutor to investigate the firings of nine US Attorneys in 2006. The announcement came as the DOJ’s Inspector General and its Office of Professional Responsibility released its report on its investigation into the firings. The report called the firing process “fundamentally flawed” and was highly critical of former AG Alberto Gonzales and former Deputy AG Paul McNulty for allegedly abdicating their responsibilities and allowing Gonzales’ former chief of staff Kyle Sampson to oversee the process. Gonzales was also faulted for his “extraordinary lack of recollection about the entire removal process.” The investigators were unable to determine if any indictments were warranted because of the refusal of Karl Rove, Harriet Miers, former DOJ official Monica Goodling and others to cooperate and the White House’s refusal to turn over requested documents.

Unlike the IG and OPR, Dannehy has prosecutorial powers and can compel witnesses from outside the DOJ to appear. Will she empanel a grand jury? It remains to be seen, but she appears to have the confidence of Mukasey, who said “the Justice Department has an obligation to the American people to pursue this case wherever the facts and the law require.” (NYT, WaPo)

Twin Cities businessman Tom Petters is well known in the region as the founder of Petters Warehouse Direct and the owner of Sun Country Airlines. His Petters Worldwide group also includes Polaroid and Fingerhut among its holdings. But his future is now in doubt after the FBI executed nine search warrants last week. According to the affidavit for the search warrants, Petters is accused of using capital raised by his equity company, Petters Co. Inc. (PCI), “for his other business ventures and to support his extravagant lifestyle.” At least four other associates are involved.

The affidavit, which was unsealed on Friday, reveals that an unnamed cooperating witness wore a wire in meetings with Petters and his associates; the witness will plead guilty to conspiracy. On one recording Petters allegedly “talks about fleeing the country and creating fabricated defenses if the fraud scheme is discovered.” One of his associates is allegedly on tape as saying that the amount of the fraud could exceed $2 billion.

The alleged fraud scheme lured investors by claiming that their money was secured by merchandise purchased from certain wholesale vendors and sold to Wal-Mart, Sam’s club and other retailers. According to the FBI, these were all sham transactions; the purchase and sales orders were fictitious, and the wholesale vendors were shell companies allegedly used to launder funds to PCI. The Star Tribune has an extensive story here.

Former Credit Suisse broker Julian Tzolov, charged with securities fraud in an indictment unsealed on September 3 (earlier), was told Friday by US District Judge Jack Weinstein in Brooklyn to return $2 million he sent to Bulgaria while he was under investigation. Tzolov went missing when the investigation was revealed and was thought to be in his native Bulgaria, but he returned and surrendered a day later. After AUSA Greg Andres said Tzolov had sent $2.3 million to Bulgaria, Tzolov said the money was sent to his parents to buy property. That didn’t go over well with Weinstein, who told him to get it back and put it in escrow. Weinstein also set a tentaive trial date of April 27, 2009. Tzolov’s former colleague Eric Butler will stand trial with him. The two allegedly misled investors by selling customers auction rate securities backed by mortgageswhen they had represented the securities as being backed by student loans (Reuters).

Friday’s testimony from government witnesses centered on the extensive amount of work performed by VECO on Sen. Ted Stevens’ Alaska home. A number of tradesmen testified, inclding an electrician who worked about 400 hours on the project at about $29 per hour, none of which was ever billed to Stevens by VECO.

A 28-page expense report from VECO which was introduced into evidence contains a note that there is to be “no paper trail” and “no who” on the project “per Bill Allen” (former VECO CEO). VECO bookkeeper Cheryl Boomershine testified that she received the note after asking for an explanation of a certain expense.

Allen, the government’s key witness, is expected testify Monday ahead of schedule. Friday’s testimony went faster than expected, leading prosecutors to tell US District Judge Emmet Sullivan that witnesses originally scheduled Monday might not make it from Alaska in time. Judge Sullivan told them they had better get it straightened out and threatened to end their case early if the witnesses wren’t ready.

(McClatchy, DowJones Newswires)

• Prosecutor Brenda Morris said that Stevens used VECO Corp. as his “own personal handyman service” and indicated that jurors would hear a recorded conversation in which Stevens told former VECO CEO Bill Allen that “the worst that could happen to the two was if anyone found what the company had done for him was that they’d have to spend a lot of money on lawyers - and perhaps serve a little jail time.”
• Stevens’ attorney Brendan Sullivan blamed “the deviousness of Bill Allen” for renovations to Stevens’ Alaska home and other undisclosed gifts at the heart of the prosecution’s case. He also shifted responsibility to Stevens’ wife Catherine: “She was the person who opened the account, reviewed the bills; she was the person who wrote the check.”
• Sullivan also said “This is a renovation by a married couple that lives 3,300 [miles] from the renovation. They live here with us in the District of Columbia because he works up here on Capitol Hill.” Apparently he really doesn’t live in Alaska; how will that play with the electorate?

(WSJ, Anchorage Daily News, Politico)

The full US Court of Appeals for the Tenth Circuit in Denver on Thursday heard oral arguments in the appeal of former Qwest CEO Joe Nacchio. The full court had earlier agreed to review the March 17 decision of the three-judge panel which reversed Nacchio’s insider trading convictions on grounds that US District Judge Edward Nottingham improperly excluded testimony from expert defense witness Professor Daniel Fischel.

Although the three-judge panel ruled 2-1 in favor of reversal, news reports from the Rocky Mountain News and Reuters indicate that six of the nine judges who heard the case were overtly critical of Nacchio attorney Maureen Mahoney’s arguments. Chief Judge Robert Henry and the two judges who earlier ruled in favor of reversal appeared to support Nacchio’s claims.

Nacchio was convicted in April 2007 of 19 of 42 counts of insider trading and was sentenced to 72 months in prison. He has been free on bond during his appeal.

In Sacramento on Wednesday, US District Judge Lawrence Karlton sentenced community activist and fundraiser Julie Lee of San Francisco to one year and one day in prison in connection with the illegal diversion of state grant money to a political campaign. In July, a federal jury convicted Lee on two counts of mail fraud and three counts of attempted witness tampering. Evidence showed that she took $125,000 of a $500,000 state grant to develop a community center (which was never built) and funneled it through intermediaries to the Secretary of State campaign of Kevin Shelley. She also allegedly attempted to persude three witnesses not to cooperate with the investigation of her activities. Shelley resigned in 2005 after the story broke but has never been charged and has denied invovement. Lee still faces state charges in the matter (San Francisco Chronicle, DOJ).

Twelve jurors and four alternates have now been seated for the US District Court trial in Washington of Sen. Ted Stevens (R-Alaska) on charges of making false statements on his Senate financial disclosure forms between 1999 and 2006. McClatchy’s story offers some background on the jurors. Opening statements begin tomorrow; the trial is expected to take three to four weeks.

Like a punch-drunk bum who doesn’t know when to quit, Travis County DA Ronnie Earle on Monday asked Texas’ Third Court of Appeals to reconsider the August 22 ruling (earlier here, analysis here) by a three-judge panel of the Court in the cases of Tom DeLay associates John Colyandro and Jim Ellis. The Court has already refused an en banc rehearing.

The Austin-American Statesman reports here that Earle’s appeal implies (without naming names) corruption among the three judges who rendered the decison:

The dark shadow of corruption of our system of justice looms over this case. Every lawyer has a duty to raise questions of corruption that go to the heart of our judicial system, and it is in the discharge of that duty that the State pursues this effort.

Earle will fold up his circus tent and retire shortly, but it’s obvious that the clown will keep performing his act until the bitter end. Way to go, Ronnie. Imply corruption by the very people who will hear your appeal. That should sit well.

The US Court of Appeals for the Third Circuit on Tuesday denied a motion by attorneys for former Allegheny County Coroner Cyril Wecht requesting a 90 day stay of its order remanding the case to US District Court for possible retrial. Wecht’s attorneys sought the delay to prevent a retrial from starting while they try to get the Supreme Court to consider taking the case, which Wecht is appealing on double jeopardy grounds. In denying the motion as unnecessary, the court said that a retrial wouldn’t prevent Wecht from appealing (Pittsburgh Post-Gazette).

Yet another example of the blatant Medicare fraud that’s been going on in public for years: a federal jury in Los Angeles on Monday convicted the owner of durable medical equipment supplier Pacific City Group in connection with a scheme to get Medicare to pay for motorized wheelchairs that weren’t needed. Leonard Nwafor was convicted on 11 counts including health care fraud and conspiracy. Between January 2006 and May 2008 his company billed Medicare over $1.1 million and was paid $526,000 for the wheelchairs, which sell for as much as $7,000 each. Evidence at the trial allegedly showed that prescriptions for the motorized wheelchairs purporting to be from several LA-area doctors were forged. A “beneficiary” testified that a company representative posing as a Medicare official threatened her with loss of benefits if she and her husband didn’t accept two wheelchairs they didn’t need.

Nwafor faces a statutory maximum of 110 years in prison. His sentencing is scheduled for December 1 before US District Judge John Walter. He also faces federal mail fraud charges in a separate case (DOJ).

John Mohan of Delray Beach, Florida on Friday pleaded guilty to a one-count information charging him with wire fraud in connection with the theft of $1.2 million in client funds held in escrow. Mohan worked as a mortgage broker and closing agent. Among the funds collected were amounts to be used to pay off existing mortgages. Mohan allegedly diverted these funds for his personal use, sometimes making payments on the original mortgages in an effort to hide the fraud and prevent foreclosure. He faces a stautory maximum of 20 years in prison. Sentencing is scheduled for December 19 before US District Judge James Cohn in Fort Lauderdale (Bizjournal, DOJ).

Following reaction to his report of corruption in the Royalty-In-Kind (RIK) program of the Minerals Management Program (MMP) of the Department of the Interior (earlier), the department’s inspector general Earl Devaney on Thursday testified before the House Natural Resources Committee. Devaney said he recommended that the DOJ prosecute officials Gregory and Lucy Dennet, saying “Simply stated, the MMS employees named in these reports had a callous disregard for the ethical rules by which the rest of us are required to play.” The DOJ declined to prosecute them and has not explained its decision (McClatchy).

Jury selection begins today in the trial of Alaska Senator Ted Stevens for making false statements on his Senate financial disclosure forms between 1999 and 2006. Bloomberg has a background summary here. In one of the more interesting pretrial rulings, US District Judge Emmet Sullivan on Thursday ordered the DOJ to post Stevens’ defense exhibits on its own website, saying “I don’t think I’m overstepping my authority. There’s nationwide interest in this case.” Sullivan also ruled that the defense is entitled to medical records documenting a head injury sustained by former VECO CEO Bill Allen in a motorcycle accident. Allen has pleaded guilty in the ongoing Alaska corruption probe and is expected to be the key witness against Stevens (Legal Times blog).

Memphis Mayor Willie Herenton, already under investigation by the FBI in connection with the awarding of no-bid city contracts to his contractor friends, is now being investigated for his role in a redevelopment plan involving Greyhound Bus Company. The site of the company’s downtown bus station is allegedly set to be redeveloped by contractor Elvin Moon, a Herenton friend, in a secretly-made deal that shuts out other interested parties and involves building a new facility for Greyhound near the airport. Although the roles of Moon and Greyhound are questionable, Herenton appears to be the target (Commercial Appeal).

Attorneys for former Allegheny County Coroner Cyril Wecht said Thursday they plan to ask the US Supreme Court to review the recent Third Circuit ruling that a retrial of Wecht was not constitutionally barred. Wecht wants the charges dismissed on double jeopardy grounds (earlier). Wecht’s attorneys filed a motion with the Third Circuit requesting a 90 day delay in sending the case back to US District Court while they try to get the Supreme Court to consider taking the case (Pittsburgh Tribune-Review).

David Burns, formerly of Kingston, New Hampshire, on Monday pleaded guilty in US District Court in Concord to wire fraud charges in connection with the theft of $1.6 million from his disabled daughter. Burns is now in state prison after being convicted in 2004 of trying to strangle his girlfriend. Burns’ daughter was born with brain damage and was awarded over $2.4 million in damages (including interest) from a malpractice suit. The indictment alleged that in the 47 months after the money was deposited in an account managed by a Boston law firm in 1999, Burns withdrew over $1.6 million and spent it on purposes not related to his daughter, including attorneys fees, bail on criminal charges, drug rehabilitation expenses, race cars, funeral expenses, and illegal drugs.

Burns’ sentening is scheduled for Decemeber 16; he faces a statutory maximum of 20 years in prison. New Hampshire’s Office of Public Guardian sued the Boston law firm and reached a settlement which made the daughter whole financially, according to AUSA Arnold Huftalen (Union Leader, DOJ).

Convicted former class action attorney Bill Lerach has been transferred from the minimum security federal prison camp at Lompoc, California to the Federal Correctional Institution in Phoenix, “a medium security facility for male offenders.” Lompoc was a fenceless camp, Phoenix has prison cells. Officials won’t comment but the move is apparently in response to Lerach’s alleged offer to let a prison guard use his San Diego Chargers season tickets (earlier), which landed him in “administrative segregation” for 23 hours a day (Legal Pad, Portfolio).

On July 28 Zach Scruggs was permanently disbarred from practicing law in Mississippi. His March 21 plea hearing transcript contains this exchange:

THE COURT : All right, Mr. Scruggs. Of course, the legal profession that you say you love so much, you will not be a part of it the rest of your life. You understand that?
THE DEFENDANT : Yes, Your Honor.

But that was oh so long ago! Now Zach doesn’t see it that way at all. He now claims that Mississippi Bar rules “do not provide for permanent disbarment.” He has asked the Mississippi Supreme Court for clarification and has filed a motion in US District Court asking for a stay of federal disbarment until the question is resolved (Daily Mississippian, Daily Journal).

Rule 6 of the Mississippi Bar’s Rules of Discipline doesn’t contain the word “permanent.” However, it doesn’t appear to provide for reinstatement except in cases of reversal of conviction (or judgment).

Martin Bodner, former CFO of Tommy Hilfiger Handbags and Small Leather Goods Inc. (a licensee of Tommy Hilfinger Corp.), has admitted stealing more than $19 million from the company between 2000 and 2007. He pleaded guilty on Tuesday in US District Court in Manhattan to a two-count information charging him with mail fraud and wire fraud. He allegedly accomplished the theft largely by using his authority to secretly increase his salary and bonuses and arranging to be reimbursed for phony expenses. Bodner is scheduled to be sentenced on November 5 by US District Judge P. Kevin Castel. The plea agreement calls for a sentence of 63 to 78 months in prison (NYT, CFO).

Harriet Walters, a former manager in the District of Columbia Office of Tax and Revenue, on Tuesday pleaded guilty before US District Judge Emmet Sullivan in DC to counts of wire fraud, money laundering conspiracy, federal tax evasion, and District of Columbia tax evasion. Walters, who was the principal in an 18 year long fraud scheme, admitted issuing 226 fraudulent property tax vouchers totalling over $48 million between 1989 and 2007. Nine of her co-conspirators have already pleaded guilty; two others are awaiting trial. A sentencing date has not been set. Sullivan expressed doubts about the 15 to 18 years called for in the plea agreement and set a status hearing for October 27 (DOJ, Washington Times).

Following the Second Circuit’s August 28 ruling in US v. Stein (earlier), four defendants remain: former Sidley Austin LLP law partner R. J. Ruble and former KPMG LLC partners David Greenberg, John Larson and Robert Pfaff. On September 10 US District Judge Lewis Kaplan denied (.pdf) their motion to dismiss the indictment on grounds of denial of due process (h/t White Collar Prof Blog).

Minh Huynh and Thien Tuan Vo, two Fort Worth area chiropractors, were indicted last week on charges that they defrauded insurance companies by seeking payments for bogus treatments of “victims” of staged accidents. Huynh was charged with three counts of health care fraud, one count of conspiracy to commit mail fraud and one count of mail fraud. Vo faces one count of health care fraud. The indictment alleges that they received “patients” from a law firm which had contracted to represent participants in staged accidents. They allegedly then supplied the law firm with falsified treatment and billing records which were submitted to insurance companies. Hyunh also allegedly paid kickbacks to an employee of the law firm in exchange for referrals. The Star-Telegram describes the scheme as a fraud that took in more than $1 million; more indictments are likely (DOJ).

Last week’s surprising announcement that Thomas and Pamela McIntosh were dropping extra-contractual and punitive damage claims against State Farm indicated that the case was about to settle. On Monday, a confidential settlement was announced and US District Judge L. T. Senter dismissed the case (.pdf). While the McIntoshes’ attorney Chip Merlin claimed that the settlement had no bearing on other pending State Farm lawsuits, State Farm’s press release, although certainly biased, really hits the nail on the head by describing the case the “centerpiece of Dickie Scruggs’ flawed Katrina legal strategy.” The Sun Herald has more here.

Leib Pinter, one of two principals of now-defunct Olympia Mortgage indicted in separate fraud schemes (earlier), on Thursday pleaded guilty in US District Court in Brooklyn to one count of conspiracy in connection with the theft of $44 million from Fannie Mae. Pinter was indicted in May on conspiracy and wire fraud counts. He allegedly diverted the payoff proceeds for 257 refinanced home mortgage loans funded by Fannie Mae and serviced by Olympia by wiring the funds to a bank account controlled by Olympia instread of to Fannie Mae. Pinter’s sentencing is scheduled for December 19; guidelines call for a sentence of about ten years. In any event, it’s far too late to help Fannie Mae (Reuters).

The case of Pinter’s former partner Barry Goldstein is still pending. He was charged with conspiracy and bank fraud in connection with Olympia’s sale of a portfolio of 12 nonperforming mortgage loans to Credit Suisse using falsified loan histories.

In a unanimous decision (.pdf), the Virginia Supreme Court on Friday overturned the state’s anti-spam law on federal constitutional grounds and reversed the conviction of Jeremy Jaynes, who in 2004 became the first person in the country to be convicted of a felony for spamming. The court ruled that the state law violates protected speech under the First Amendment because it prohibits all unsolicited email, not just commercial junk mail. Jaynes was sentenced to nine years in prison but has been under house arrest pending the outcome of his appeal. Virginia Attorney General Bob McDonnell said he will appeal the decision to the US Supreme Court (WaPo).

Still crazy after all these years: most of the world has long since stopped wondering what happened to Melvin Dummar in the 30 years since a Nevada probate court ruled the so-called Mormon Will of Howard Hughes was a fake. But Melvin Dummar never went away. In 2006 he filed a federal suit in Salt Lake City alleging that a Hughes relative and an executive of the holding company that controls Hughes’ estate conspired to coordinate false testimony to discredit the handwritten will. The suit was dismissed last year but Dummar appealed.

On Friday, the US Court of Appeals for the Tenth Circuit upheld the dismissal. The Salt Lake Tribune’s story quotes Dummar’s attorney Stuart Stein: “Perhaps it comes down to the rich and the powerful always win and the poor and powerless always lose.” And perhaps he said that with a straight face. Too bad for Paul Le Mat, who perhaps was waiting for a Melvin and Howard sequel.

Here’s another strange development in the case of former Allegheny County Coroner Cyril Wecht: in the wake of the Third Circuit’s ruling that a retrial was not barred and its removal of US District Judge Arthur Schwab (earlier), it has been revealed that former Third Circuit Judge Timothy Lewis has been working with both sides to to avoid a retrial. In a statement released on Friday, USA Mary Beth Buchanan said she was approached by Lewis several months ago and agreed to participate, but threatened to retry Wecht if the talks fail. However, comments by Wecht attorney Jerry McDevitt indicate it’s a new effort following the Third Circuit’s ruling. McDevitt criticized Buchanan for discussing the matter, saying it violated an agreement not to go public. He added: “Threats of a willingness to proceed to trial are counterproductive to that effort, and a needless reminder of the power of the United States Attorney to do as she pleases.” (Pittsburgh Post-Gazette)

Daniel Dove, formerly of Clintwood, Virginia, was sentenced on Tuesday to 18 months in prison by US District Judge James P. Jones in the Eastern District of Virginia for his role in a P2P internet piracy group. Dove, an administrator for the now-defunct EliteTorrents, was convicted by a jury in June on one count of conspiracy and one count of felony copyright infringement for using BitTorrent technology to distribute copyrighted movies. EliteTorrents attracted the FBI’s attention in 2005 when it released “Star Wars Episode III: Revenge of the Sith” six hours before it was released in theaters. The operation was closed as part of the FBI’s Operation D-Elite. Dove is the eighth administrator to be convicted in connection with the operation, and the only one to plead not guilty and go to trial (Daily Tech, DOJ).

Anthony Seminerio, a Democratic Assemblyman from Queens, was arrested on Wednesday and charged with one count of honest services mail fraud. He is accused of setting up his own consulting firm for the purpose of taking payments from businesses to influence his official actions. The complaint describes a particular scheme in which a hospital paid his consulting firm a total of about $390,000 to influence legislation. In one recorded conversation with a cooperating witness, Seminario allegedly explains what caused him to set up his own consulting firm: “…I was doing favors for these sons-of-bitches there, you know, they were—they were making thousands. ‘Screw you, from now on, you know, I’m a consultant.’” (NYT, DOJ)

A report by the US Department of the Interior’s inspector general Earl Devaney alleges that a culture of sex, drugs and corruption exists at the Denver-area office of the Department’s Minerals Management Program (MMS), which is responsible for collecting royalties from oil and gas producers. The office is home to the MMS’ Royalty-In-Kind (RIK) program. The RIK program allows royalties to be paid in oil and gas rather than money.

The report (.pdf) states that between 2002 and 2006, 19 RIK employees, about one-third of the staff, “had socialized with, and had received a wide array of gifts from, oil and gas companies with whom the employees were conducting official business.” Four companies were allegedly involved: Chevron, a Shell subsidiary, Gary-Williams Energy and Hess Corporation. The report describes “an organizational culture lacking acceptance of government ethical standards, inappropriate personal behaviors, and a program without the necessary internal controls in place to prevent future unethical or unlawful behavior,” including allegations that some employees “frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relations with oil and gas company representatives.” Devaney released a separate report on former MMS director Gregory Smith, alleging improper conduct, and made public a memo to Interior Secretary Dirk Kempthorne which said his office had referred cases against two other former high-ranking MMS officials to the DOJ, which has declined to prosecute (WSJ, WaPo).

Raffaello Follieri, former beau of actress Anne (Agent 99) Hathaway, pleaded guilty on Wednesday before US District Judge John Koeltl in Manhattan to one count of conspiracy, eight counts of wire fraud and five counts of money laundering in connection with a real estate investment scheme he operated from 2005 to 2007. Follieri, who was indicted in June (earlier), admitted soliciting more than $2 million from investors by falsely claiming that he had close connections with the Vatican that enabled him to purchase unwanted Catholic Church properties in the US at a substantial discount, then converting the money to personal use. He will be sentenced on October 3; his plea agreement calls for a sentence of 51 to 63 months and requires him to forfeit over $2.4 million in cash plus expensive watches and other jewelry (WSJ, DOJ, plus Reuters on Hathaway’s reaction).

In East St. Louis, Illinois on Friday, US District Judge Michael J. Reagan sentenced Kyle Kimoto of St. George, Utah and Las Vegas to 350 months in prison for operating an advance fee telemarketing scheme that allegedly defrauded over 300,000 consumers of approximately $43 million. A jury convicted Kimoto in April on charges of conspiracy, mail fraud and wire fraud. In the scheme, consumers with substandard credit paid an advance processing fee of $159 or more, believing they would receive a MasterCard; what they actually got was a “benefits package” with an application for a stored value MasterCard — a debit card with no credit line which had to be “loaded” with funds before it could be used (St. Louis Post-Dispatch).

Convicted former class action attorney Bill Lerach, sentenced to two years in prison for his role in his firm’s kickback scandal, has landed in hot water: shortly after arriving at the minimum security federal prison camp at Lompoc, California in May, he allegedly offered a guard use of his San Diego Chargers season tickets. The guard reported the incident and Lerach has reportedly been put in “administrative segregation” for 23 hours a day, pending a hearing. This is considered a “high category” offense for an inmate and could result in his transfer to a higher security prison and other sanctions (ABA Journal, Legal Week).

The Houston Chronicle reports that convicted former Dynegy executive Jamie Olis on Monday filed suit in Delaware Chancery Court seeking more than $600,000 in defense costs. Is it coincidental that the filing comes less than two weeks after the Second Circuit affirmed Judge Kaplan’s rulings in US v. Stein?

That hammering sound you hear on the Mississippi coast isn’t coming from people boarding up for another Gulf hurricane–it’s the sound of more nails in the coffin lid of the former Scruggs Katrina Group’s once-grand plans to extort unwarranted punitive damage settlements from State Farm.

In McIntosh v. State Farm, on Monday the new attorneys for Thomas and Pamela McIntosh on Monday filed a Motion For Dismissal With Prejudice Of Extra-Contractual And Punitive Damage Claims, conceding among other things that the majority of their damage was caused by flood, that State Farm promptly paid their wind damage and the full limits of their flood policy, and that there is no credible evidence of bad faith or other conduct that would give rise to punitive damages. State Farm quicky responded and US District Judge L. T. Senter wasted no time approving. Per Anita Lee’s Sun-Herald story there’s still an issue of actual wind damages.

And if you should hear a whooshing sound, that’s just the wind being knocked out of the Rigsby sisters’ sails in ex rel. Rigsby, the qui tam case.

Ehud Tenenbaum, a 29-year-old Israeli national living in Montreal, was arrested last week and charged with theft of credit card data and fraud in connection with a $1.8 million theft from a Calgary company that sells prepaid debit cards. Tenenbaum is accused of hacking into Direct Cash Management’s computers and increasing the value of the prepaid cards; the money was then allegedly withdrawn from ATMs by three accomplices.

Ehud Tenenbaum was also the real name of “The Analyzer,” an Israeli teenager who in 1998 managed to hack into computers belonging to the Pentagon, NASA and the Knesset. He was convicted and served time in an Israeli prison. While the Calgary Herald and other sources say that authorities are trying to determine if the arrested man is the Pentagon hacker of the same name, a story from Haaretz leaves little doubt, since the hacker’s mother is quoted as accusing the FBI of framing her son.

US District Judge Vanessa Gilmore on Friday delayed the retrials of former Enron Broadband executives Joseph Hirko, Rex Shelby and Scott Yeager while they take their case to the US Supreme Court. In March, a three-judge panel of the Fifth Circuit ruled that Gilmore was correct in refusing to dismiss most of the remaining charges against Hirko and Shelby and all the remaining charges against Yeager (earlier) after jurors were hung on many counts; the three were acquitted on some counts. Gilmore had scheduled the retrial of Hirko and Shelby for November 3, while Yeager’s retrial was set for January 12, 2009. But prosecutors said that it would be mid-November at the earliest before the Supreme Court could decide if it would take the case. In response, Gilmore rescheduled the Hirko and Shelby retrial for December 1 and the Yeager trial for March 24, 2009 (Houston Chronicle).

Remaining Kentucky Fen-Phen defendants William Gallion and Shirley Cunningham Jr., whose first trial ended in a mistrial in early July, were reindicted on Wednesday by a federal grand jury in Covington and will face new counts. The original indictment charged them with one count each of conspiracy to commit wire fraud. The new indictment charges them with eight counts of wire fraud in addition to a conspiracy count (Lexington Herald-Leader).

US District Judge Danny Reeves on Friday denied a request by an attorney for Gallion to delay the retrial until April. Reeves offered trial dates in either October or February. Gallion and Cunningham are scheduled to be arraigned Thursday (Herald-Leader).

A three judge panel of the US Court of Appeals for the Third Circuit on Friday ruled (.pdf) that US District Judge Arthur Schwab erred in the procedures he used when he declared a mistrial on April 8 in the public corruption trial of former Allegheny County Coroner Cyril Wecht, but said that he was correct to conclude that there was “manifest necessity” to declare a mistrial without Wecht’s consent. As a result, the Court ruled that there was no constitutional bar to retrying Wecht. However, the Court remanded the case to the Chief Judge of the District Court to reassign the case to a different judge. USA Mary Beth Buchanan declined to say if she intended to retry the case (Pittsburgh Post-Gazette, Trib).

US District Judge Ellen Huvelle of the DC Circuit on Thursday sentenced former lobbyist Jack Abramoff to 48 months in prison for public corruption. Abramoff pleaded guilty in January 2006 to conspiracy, honest services fraud and tax evasion charges. He was previously sentenced to 70 months in prison in connection with the Florida Sun Cruz Casinos fraud case and has served about 22 months to date. With this sentence he is expected to be in prison until 2012. The sentence was nine months longer than prosecutors had recommended based on Abramoff’s cooperation in cases involving officials he corrupted, and much less than the approximately 11 years he could have received under sentencing guidelines. It was not nearly long enough to satisfy representatives of two Indian tribes he defrauded (NYT, DOJ).

Matthew Marino, brother of convicted former Bayou Group CFO Daniel Marino, pleaded guilty on Wednesday before US Magistrate Judge Lisa Margaret Smith in White Plains, New York to a one count information in which he admitted knowing about the fraud at the now-defunct hedge fund and actively helping conceal it. Daniel Marino and Bayou co-founder Samuel Israel III each received 20 year prison sentences earlier this year. Matthew Marino faces a maximum sentence of three years in prison; sentencing is scheduled for December 4 (Reuters, DOJ).

That didn’t take long: missing former Credit Suisse broker Julian Tzolov, who was indicted Wednesday on securities fraud charges, surrendered on Thursday at JFK and was taken into custody by the FBI. His arraignment is scheduled for today (Reuters).

In a superseding indictment unsealed Wednesday in US District Court in Brooklyn, Eric Butler and Julian Tzolov, two former Credit Suisse brokers, were charged with conspiracy, securities fraud, and wire fraud in connection with allegedly fraudulent sales of auction rate securities to Credit Suisse Group customers. According to the DOJ Press Release:

The superseding indictment alleges that the defendants schemed to obtain higher sales commissions by selling auction rate securities (“ARS”) backed by mortgages to Credit Suisse clients who, in fact, had placed orders to buy ARS backed by student loans. The defendants concealed their scheme by falsifying the names of the ARS the clients bought and otherwise misleading the clients into believing they had bought ARS backed by student loans. When the mortgage-backed ARS market failed, the clients lost their money.

Butler pleaded not guilty on Wednesday before US Magistrate Judge Ramon Reyes, who released him on bond. Tzolov went AWOL shortly after the investigation became public knowledge (earlier) and is believed to be in his native Bulgaria (Reuters).

As expected, US District Judge Samuel Kent on Wednesday pleaded not guilty to one count of abusive sexual conduct and two counts of attempted aggravated sexual abuse. He entered his pleas in Houston before Judge Edward Prado of the US Court of Appeals for the Fifth Circuit. Kent, who was indicted last week (earlier), said “For the record I absolutely intend to testify, and we are going to bring a horde of witnesses.” The charges arise from complaints made his former case manager Cathy McBroom. Kent claims their relationship was consensual.

Although Prado was not on the panel that late last year reassigned and suspended Kent over the allegations, he stated that a judge from outside the Fifth Circuit would be appointed. He released Kent on his own recognizance. Kent is continuing to hear cases (Houston Chronicle).

Albert “Jack” Stanley, former CEO and later chairman of Kellogg Brown & Root (now KBR), pleaded guilty on Wednesday in Houston before US District Judge Keith P. Ellison to a two-count information charging him with conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to commit mail and wire fraud. He is cooperating with prosecutors. In the FCPA count, he admitted participating in a decade-long scheme to bribe Nigerian government officials to obtain contracts, in particular paying $182 million in bribes to obtain a $1.2 billion contract as part of the construction of a $6 billion gas liquefaction plant on Bonny Island, Nigeria. In the second count, he admitted taking $10.8 million in kickbacks from a consultant he hired at KBR. A sentencing date has not been set but the plea agreement calls for him to serve seven years in prison (Houston Chronicle, DOJ).

Texas’ Third Court of Appeals on Friday refused by a 4-2 vote the request of Justice Diane Henson for an en banc review of its August 22 decision in the cases of Tom DeLay associates John Colyandro and Jim Ellis. The Court released Henson’s dissenting opinion over the weekend. The vote was along party lines. Travis County DA and perennial master of the absurd Ronnie Earle called the ruling “absurd” and said he might take it to the Texas Court of Criminal Appeals (San Antonio Express-News, earlier here and here).

In court filings made Tuesday by attorneys for US Sen. Ted Stevens (R-Alaska) it was revealed that FBI agents recorded 105 phone conversations involving Stevens out of more than 2800 calls recorded as part of the Alaska public corruption investigation involving VECO Corporation and its CEO Bill Allen. Stevens’ attorneys want the calls ruled inadmissible on grounds that they don’t pertain to the charges in the indictment:

The government obviously wishes to import the stench of a bribery prosecution into a case that is nothing of the sort. The government has cited no case, and we are aware of none, in which prosecutors were permitted to suggest a quid pro quo when no quid pro quo was or could be charged in the indictment. Particularly here, where the government concedes that the senator’s official acts were entirely lawful and proper, the allegations are unnecessary and unfairly prejudicial.

Stevens was indicted on seven counts of making false statements on his Senate financial disclosure forms. His trial is scheduled to begin on September 22 (Fox, AP).

George Motz, CEO of Melhado, Flynn & Associates in Manhattan and mayor of Quoque in the Hamptons, was indicted Thursday on charges of securities fraud and altering documents to obstruct an SEC examination. He is accused of operating a so-called cherry picking scheme in which he allegedly executed buy orders in the morning without allocating them to specific accounts, and then selling late in the day, assigning the profitable trades to his firm’s accounts and the less profitable or losing trades to discretionary clients. The alleged practices are said to have cost his clients $1.4 million. Motz pleaded not guilty on Friday before US Magistrate Judge Kathleen Tomlinson and was released on bond (Newsday, DOJ).

Robin Snyder of Pikesville, Maryland was sentenced on August 26 to 97 months in prison by US District Judge Catherine Blake in Baltimore in connection with a scheme to defraud commercial loan applicants. Snyder and his company Mortgage Bankers, Ltd. were convicted on February 28 on 13 counts including wire fraud, money laundering and obstruction of justice. He allegedly promoted his company online as a commercial lender for difficult loans and approved applicants subject to nonrefundable advance fees, but never completed the loans because he had no sources. He allegedly collected $650,000 in advance fees between 2002 and 2006 and even continued soliciting applicants after his indictment, in violation of his pretrial release conditions (Baltimore Sun, DOJ).

One of the two men indicted in connection with an alleged scheme to defraud Medicare by recruiting patients from Skid Row in Los Angeles (earlier) has pleaded guilty. Estill Mitts, who operated an “assessment center” in the heart of Skid Row, on Thursday agreed to plead guilty to conspiracy to commit healthcare fraud, money laundering and tax evasion. In the plea agreement, Mitts admits recruiting homeless Medicare and Medi-Cal beneficiaries for three hospitals, where they received unnecessary medical treatments or no treatment at all. One hospital, City of Angels Medical Center, was owned by Dr. Rudra Sabaratnam, who was indicted along with Mitts and has pleaded not guilty (earlier). Mitts will enter his plea on September 10. Sabaratnam’s trial is scheduled to begin on September 30 (LA Times).

A federal grand jury in Houston on Thursday indicted (.pdf, explicit language) US District Judge Samuel Kent on one count of abusive sexual conduct and two counts of attempted aggravated sexual abuse. Kent becomes the first federal judge to face federal sex charges. Count one of the indictement describes a 2003 incident, counts two and three date from 2007 and all three involve Cathy McBroom, Kent’s former case manager who had previously made public allegations against Kent. She is identified as “Person A” in the indictment.

After McBroom’s harassment complaint became public last fall, Kent was reprimanded and reassigned from Galveston to Houston effective January 2008. He has been confined to handling civil cases, other than sexual harrassment cases. It has been no secret that a federal investigation was begun late last year. The Houston Chronicle reported last month that the investigation had expanded to include allegations that he accepted but failed to report gifts and also sold his home in a deal arranged by a lawyer with dozens of cases in his court.

Kent is represented by Dick DeGuerin, while Rusty Hardin is representing McBroom. Kent apparently will contend that the relationship was consensual (Houston Chronicle, with more background here).

Chief Judge Dennis Jacobs, writing for a unanimous three-judge panel of the US Court of Appeals for the Second Circuit, today affirmed (.pdf) US District Judge Lewis Kaplan’s July 2007 dismissal of the indictments of 13 out of an original 19 defendants in US v. Stein et al. The case was was once the largest criminal tax shelter prosecution in US history. Kaplan had ruled that the defendants were deprived of their Sixth Amendment right to counsel as a result of KPMG’s decision to stop paying the defendants’ legal costs (despite contractual obligations to pay) after the government threatened to indict the firm. In affirming the dismisal, the appellate court ruled that no other remedy would return the defendants to the status quo.

In Cincinnati on Wednesday, US District Judge Arthur Spiegel sentenced Steve Warshak, founder of Berkeley Premium Nutraceuticals, to 25 years in prison for selling at least $100 million of fraudulent “natural” remedies and refusing to accept returns when the products didn’t work despite a “double your money back” guarantee. Berkeley is infamous for marketing Enzyte, a “natural male enhancement” pill which promised permanent growth and for a time also claimed to help erectile disfunction.

Warshaw was convicted in February on 93 counts including conspiracy to commit money laundering, conspiracy to obstruct proceedings before the FTC, mail fraud, bank fraud and money laundering. Three others were also convicted, including his 75-year-old mother Harriet Warshak. Spiegel sentenced her to two years in prison (Kentucky Post).

Los Angeles-based class action attorney Pierce O’Donnell on Wednesday pleaded not guilty to charges that he funneled $26,000 in contributions through his employees to a PAC supporting a presidential candidate. The candidate was apparently John Edwards and the contributions were allegedly made in 2003. O’Donnell was indicted July 24 on three counts, including conspiracy, causing illegal contributions to be made and causing the campaign to make false statements to the FEC. His trial is scheduled to begin on October 21 (National Law Journal).

Thomas Rushing III, Brian Rue and William Partridge pleaded guilty on August 22 in US District Court in Austin, Texas to one count each of criminal copyright infringement for selling downloadable counterfeit software through a series of websites. They allegedly sold $2.5 million at retail value between early 2006 and September 2007. They face statutory maximum sentences of five years each; sentencing for all three defendants is scheduled for December 19 (DOJ).

US District Judge Nancy Atlas on August 21 sentenced two former natural gas traders to prison for their roles in false reporting of prices to industry publications in order to influence pricing. Michelle Valencia, formerly of Dynegy Inc., was sentenced to 57 months in prison and Greg Singleton, formerly of El Paso Merchant Energy, received a 28 month prison sentence. The two were indicted on charges of conspiracy, wire fraud and false reporting in violation of the Commodity Exchange Act, but after a jury trial in 2006 they were convicted only on the wire fraud charges: 7 counts for Valencia, one count for Singleton. Valencia’s attorney has filed notice of appeal (Houston Chronicle).

Another defeat for the Southern District of New York in its prosecution of specialist traders: In Manhattan on Monday, US District Judge Sidney Stein vacated the guilty pleas of Patrick McGagh and Joseph Bongiorno, both former specialists at Van der Moolen Specialists USA. The two men pleaded guilty to securities fraud in 2006 in connection with an interpositioning scheme, but the Second Circuit in June upheld a District Court acquittal of specialist David Finnerty and in July reversed the convictions of Van Moolen specialists, Michael Hayward and Michael Stern, ruling in both instances that the evidence was insuffcient to prove deception. In a related case, prosecutors dropped criminal charges against former LaBranche & Co. specialist Freddy DeBoer ($WSJ$, Investment News).

Robert Brodzin, former CFO of for Shriners Hospital for Children – St. Louis, pleaded guilty last Thursday before US District Judge Catherine Perry to one count of mail fraud in connection with the embezzlement of more than $828,000 from the hospital between 2004 and 2008. The stolen funds would have been used to care for sick children, but Brodzin admitted using the money for luxury items and for his tanning salon business. The indictment alleged that he accomplished this by billing the hospital for services that were never rendered by three dummy companies he had set up. His sentencing has been scheduled for November 7; prosecutors are expected to recommend a sentence in the four year range (St. Louis Post-Dispatch, DOJ).

Former KYW-TV Philadelphia news anchor Larry Mendte on Friday pleaded guilty before US District Judge Mary McLaughlin to a one count information charging him with with intentionally accessing a protected computer without authorization. Mendte admitted 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 accessed the accounts using a keystroke logger. Mendte was fired in June after the FBI raided his house. He faces a statutory maximum of five years in prison when he is sentenced on November 24. His public remarks at a news conference later Friday caused controversy after he said he had a “flirtatious, unprofessional and improper relationship” with Lane, whose attorney immediately denounced the statement (Philadelphia Inquirer here and here, our earlier entry).

As expected (earlier), Emperors Club VIP booking agent Tanya Hollander on Monday pleaded guilty before US District Judge Deborah Batts in Manhattan to one count of conspiracy to commit prostitution offenses. Hollander is the fourth and final defendant connected with the club to plead guilty in the prostitution ring case that ensnared former New York Governor Eliot Spitzer. She will be sentenced on November 25 and faces an estimated six to 10 months in prison under federal sentencing guidelines (Reuters, DOJ).

Saifoulaye Diallo and Habib Bah of New York City pleaded guilty on Thursday before US District Judge Brian Cogan in Brooklyn to to trafficking in counterfeit goods in violation of criminal trademark laws. The men admitted to distributing over 500,000 tubes of counterfeit Colgate toothpaste from China to discount stores in the US, who were no doubt trying to squeeze out a little extra profit. The retail value of the toothpaste was $730,000. The fake Colgate had no fluoride but came with a bonus of bacillus spores and diethylene glycol at no extra charge, although no illnesses were reported. Diallo and Bah face a statutory maximum of 10 years in prison; sentencing has been scheduled for January 9, 2009 (Newsday, DOJ).

US District Judge Danny Reeves on Friday drastically reduced bond for remaining Kentucky Fen-Phen defendants William Gallion and Shirley Cunningham Jr., who will be retried for allegedly pocketing $65 million more than they were entitled to under terms of the class action settlement with American Home Products on behalf of 440 Kentuckians harmed by the drug. The two men have been in custody since August 2007 under draconian bond amounts set by US District Judge William Bertelsman, $52 million for Gallion and $45 million for Cunningham; the Sixth Circuit upheld Bertelsmann’s ruling.

But Reeves, who took over the case when Bertelsman recused himself, reduced the Gallion’s bond to $2.5 million and Cunninham’s to $1.25 million, which they are expected to meet shortly. However, Reeves ordered severe restrictions including home detention, electronic monitoring and the keeping of visitor and phone logs (Louisville Courier-Journal).

The first trial resulted in an acquittal for Melbourne Mills, Jr. and ended in a mistrial for Gallion and Cunningham.

Joseph Brunson, Timothy McQueen and Tony Pough, the three African-American pastors/investment brokers who call themselves the “Three Hebrew Boys”, were indicted Thursday by a federal grand jury in Columbia, South Carolina on 12 counts of money laundering and 10 counts of transporting checks obtained by fraud. The new charges are in addition to the 35 counts of mail fraud they face from their May indictment which charged them with operating a fraudulent foreign currency trading scheme (earlier); they also face state securities fraud charges. The new counts arise from checks they received from investors which they allegedly converted to personal use. A September 3 arraignment is scheduled (WIS-TV).

In a decision published late Friday, Texas’ Third Court of Appeals upheld the 2005 money laundering indictments against James Ellis and John Colyandro (Third Court Decision, Houston Chronicle). The two operatives of former US House Majority Leader Tom DeLay were indicted on state charges of laundering $190,000 in corporate contributions through the Republican National State Elections Committee that wound up in seven targeted Texas House races in 2002. They appealed on two grounds: first, that the election code provisions under which they were indicted are unconstitutionally vague and overbroad — in particular, the statutory definition of “campaign contribution”; second, that the money laundering statute in effect at the time of the alleged offense is unconstitutionally vague, more specifically because the statute in effect in 2002 did not include checks in the definition of funds. The three judge panel flatly rejected both arguments and affirmed the district court’s decision. The Chronicle notes that all three judges are Republicans.

DeLay was not a party to this appeal, but his indictments on money laundering and conspiracy charges still stand and arise from the same occurrences.

Andrew Parker of San Antonio, owner of San Antonio Trade Group, Inc., pleaded guilty on Thursday to defrauding the Export-Import Bank of the US. WOAI reported Wednesday that US District Judge Fred Biery had given Parker one day to decide whether or not to accept a plea agreement. In an indictment unsealed May 1 (earlier here and here) Parker was accused of falsifying loan applications, submitting false reports that goods were bought with the loans, and diverting millions of the loan proceeds for his personal use. As much as $163 million was allegedly involved. He pleaded guilty to 11 of the 28 counts in the indictment, including conspiracy, wire fraud, money laundering, tax evasion, and filing false tax returns. Under the plea deal Parker faces up to ten years in prison and up to $10 million in restitution plus $495,000 in tax liability (WOAI, DOJ).

The Daily Journal reports that US Sen. Joe Biden (D-Del.) has returned campaign contributions of $2300 each from Dickie Scruggs, Zach Scruggs, Steve Patterson and Tim Balducci. An FEC report from the Biden For President campaign showed that the contributions had been donated to a cancer charity.

The WSJ Law Blog reported last December on the connection between the Biden campaign and the Scruggs defendants, including a fundraiser last August in Oxford hosted by Balducci, Scruggs and former Mississippi governor Bill Allain. Astonishingly, Biden had no comment. Not even a plagiarized speech.

US District Judge Emmet Sullivan on Wednesday denied a motion by attorneys for US Sen. Ted Stevens to move his corruption trial from Washington to Alaska. Stevens was indicted July 29 on seven counts of making false statements on his Senate financial disclosure forms (earlier). Stevens’ trial is to begin September 22; he demanded a quick trial in the hopes he could be exonerated before election day (Reuters).

Despite the indictment, Stevens is expected to win his primary contest next Tuesday against real estate developer Dave Cuddy, but recent polls show he’s trailing his expected general election opponent, Anchorage Mayor Mark Begich (Fairbanks Daily News-Miner).

Donna Gamble of Marietta, Georgia, a former Georgia Tech employee who pleaded guilty in May to all 22 counts of an indictment which charged mail fraud and theft from an organization receiving federal funds, was sentenced on Tuesday to 32 months in prison by Chief US District Judge Jack Camp in Atlanta. Gamble admitted using a Georgia Tech procurement card which was restricted to work-related expenses to make 2000 purchases of 3800 items for her personal use between 2002 and 2007. The procurement card was funded by a grant from the National Science Foundation. The total amount of Gamble’s illegal purchases was $316,000 and included personal watercraft, a popcorn machine, a wide-screen TV, robotic vacuums, a treadmill and Auburn University football tickets. Gamble hid the fraud by submitting fake receipts and making false entries in accounting records. Her activities were discovered after an audit and that was only conducted after a tip from an informant (Atlanta Journal Constitution, DOJ ).

Mark Eister, a computer tech who worked in the South Philadelphia office of indicted Pennsylvania State Sen. Vincent Fumo, pleaded guilty on Tuesday before US District Judge William Yohn to one count of conspiracy and four counts of obstruction of justice for destroying evidence implicating Fumo in fraudulent activities. The evidence was allegedly destroyed at Fumo’s behest after he learned he was being investigated by the FBI for corruption. Eister’s plea followed the August 11 guilty plea of his co-worker Leonard Luchko (earlier), and both men are expected to testify against Fumo (Allentown Morning Call, DOJ).

The public corruption trial of Fumo begins September 8 and is expected to be a months-long spectacle. The Philadelphia Inquirer has background here including the latest government filing which now puts the amount of the alleged fraud at $3.5 million.

Kyle Roher of Las Vegas pleaded guilty to two counts of wire fraud last Wednesday before US District Judge James Mahan in connection with the embezzlement of $1.6 million from his employer. Roher, a former senior business analyst with Nevada Power, allegedly forged wire transfer forms 19 times between 2002 and 2006 to disburse the funds from a Nevada Power bank account to two Bank of America accounts he controlled. Roher’s sentencing hearing is scheduled for November 12; he faces a statutory maximum of 20 years on each count (Las Vegas Sun, DOJ).