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“Utah RICO” (Utah Pattern of Unlawful Activity Act)

It’s sometimes called “Utah RICO,” or “state RICO,” or “little RICO,” but the Utah Pattern of Unlawful Activity Act (UPUAA) is not entirely identical to its federal counterpart, the Racketeer Influenced and Corrupt Organizations Act.

There are several sites that cover federal RICO, but none that focus on the state act, the UPUAA.  This site reports new decisions, examines legal issues that may arise in an UPUAA claim or prosecution, and addresses areas in which the UPUAA differs from RICO.  These are just our opinions (and sometimes just speculation) – they are not legal advice, which depends on the facts of specific cases, and no attorney-client relationship is intended.

If you learn of any developments involving the UPUAA, feel free to e-mail us confidentially, kporter@chrisjen.com.

Bail bond company charged under UPUAA

One Utah bail bond company has been charged under Utah’s Pattern of Unlawful Activity Act (“UPUAA”) in connection with the handling of property from clients as a fiduciary.  UPUAA is the state version of the Racketeering Influenced and Corrupt Organizations Act (better known as “RICO”) which Utah prosecutors have used creatively in their cases, albeit with varying success.

UPUAA charges against bail bond companies must show a ‘pattern’

Court records reported by KSL charge the owner(s) of Rebel Bail Bonds in Duschene Utah, stating:

Bail bond agencies that accept collateral act in a fiduciary capacity and are required to keep the collateral separate and apart from any other funds or assets of the licensee. Bail bond agencies are required to deposit collateral into a trust account. Once a bond is exonerated by the courts, bail bond agencies have 10 days to return the collateral to the depositor after it is requested.

Darren Brady, owner of Rebel Bail Bonds was charged last week in Third District Court in West Jordan with  engaging in a pattern of unlawful activity, two counts of unlawful dealing with property by a fiduciary and issuing a bad check and failing to make good on a payment, second-degree felonies; six counts of unlawful dealing with property by a fiduciary, a third-degree felony; five counts of unlawful dealing with property by a fiduciary, a class A misdemeanor; and unlawful dealing with property by a fiduciary, a class B misdemeanor.

UPUAA crimes must prove bail bond company had a ‘pattern’ of related predicate offenses

According to the Utah Supreme Court, the proper test for determining a pattern of unlawful activity is the “continuity plus relationship” test articulated in H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989). “The proper test for determining whether there was a pattern of unlawful activity is whether there was ‘a series of related predicates extending over a substantial period of time’ or a demonstrated threat of continuing unlawful activity and not whether there were multiple schemes.” (emphasis added).

As a result, in order to sustain allegations of a pattern of unlawful activity, a prosecutor or civil plaintiff must prove that the defendant(s) engaged in a series of related predicates over a substantial period of time. In Hill v. Estate of Allred, the Utah Supreme Court found that a period of five years was enough to satisfy this requirement. But there is no bright-line rule as to what constitutes such a “substantial period of time.”

Bail bond businesses must also be an ‘entity’ apart from the defendant

Under Utah law in order to sustain a conviction under subsection (3) of UPUAA, the State must prove the existence of an “enterprise” that is distinct from the defendant themselves.  In State v. Hutchings, the Utah Court of Appeals determined that as it related to the sole proprietorship at issue in in the case, “the man and the proprietorship really are the same entity in law and fact.” As a result, the State had failed to pass the distinction test.

While the Utah Supreme Court has declined to require a distinction between the individual and the entity under subsections (1) and (2), it does require the state to prove the existence of more than a one-man show under subsection (3). Defendants facing charges under the UPUAA need to be cognizant of this fact and must take steps to ensure their counsel argues that point to the court, and that the jury is properly instructed on the issue at trial.

 

UPUAA charges against ‘Titanic Crip Society’ find probable cause

An Ogden judge this week ruled that six criminal cases targeting alleged members of a small northern Utah gang can move forward to trial.  The six men were charged in June of 2016 with engaging in a pattern of unlawful activity under the Utah Pattern of Unlawful Activity Act (“UPUAA”), as well as other charges including assault, aggravated assault, and aggravated robbery.  The UPUAA charges are similar to charges under the UPUAA’s federal counterpart, the Racketeer Influenced and Corrupt Organizations Act, better known as RICO.

UPUAA charges against gang ruled to be supported by probable cause

This fall, Second District Judge Ernie Jones on Tuesday ruled there was enough evidence for the case to move forward against the six men: Tamer Ahmed Hebeishy, 33, Sharif Ahmed Hebeishy, 36, Sadat Ahmed Hebeishy, 35, Daniel Ray Lopez, 26, Brock Adam Pickett, 29, and Jaron Michael Sadler, 22.  All defendants have pled innocence and a trial has been set for January of 2018.

The defense attorneys representing these men have argued that their clients were no longer gang members, or that their crimes were not committed to appease gang leaders.  They also attacked the credibility of witnesses who described the gang’s structure and denied that the gang was an “enterprise under the UPUAA statute.  Section 76-10-1602 of the Utah Code describes the term “enterprise” and “pattern of unlawful activity as follows:

(1) “Enterprise” means any individual, sole proprietorship, partnership, corporation, business
trust, association, or other legal entity, and any union or group of individuals associated in fact
although not a legal entity, and includes illicit as well as licit entities.
(2) “Pattern of unlawful activity” means engaging in conduct which constitutes the commission of
at least three episodes of unlawful activity, which episodes are not isolated, but have the same
or similar purposes, results, participants, victims, or methods of commission, or otherwise are
interrelated by distinguishing characteristics. Taken together, the episodes shall demonstrate
continuing unlawful conduct and be related either to each other or to the enterprise.

According to a recent article in the Salt Lake Tribune, the Titanic Crip Society has had a presence in northern Utah since the 1990s, and that their membership has fluctuated between 10 and 20 members.  Weber County prosecutors have said that they hope the new UPUAA charges will help to curb activities of the gang.  If convicted of all charges, the men would face five-to-life prison sentences.

Deputy Weber County Attorney Branden Miles spoke of the charges against six members of the Titanic Crip Society last year: “We believe a targeted prosecution of their leadership has the potential to disrupt their activities and terminate their existence as a criminal street gang.”  Miles also said that the new UPUAA charges represent “a new approach” for Weber County prosecutors in response to gang crime.

UPUAA charges are the first racketeering case against gang leaders in Utah

The charges against the six men represent the first such charges targeted at a street gang as a whole since the Utah Supreme Court dissolved a city-wide gang injunction in Ogden against the main rivals of the Titanic Crip Society, the Ogden Trece, in 2013.

According to the charging documents, the six men charged were Titanic Crip Society leaders, which the gang refers to as “Big Homies.”  As “Big Homies,” the gang’s leaders are removed from the day-to-day criminal activity of the gang that is carried out by younger members (“Little Homies”) on the directions of the leaders.  Prosecutors have said that the three Hebeishy brothers charged under the UPUAA are most likely the longest-standing members of the Titanic Crip Society, and that, because of the way the gang is structured, the leaders “are able to observe/portray a ‘gangster’ lifestyle while not fully exposing themselves to the risks of criminal charges.”  However, that has all changed with the new charges filed by the Weber County District Attorney’s Office.

Currently, all six of the men charged under the UPUAA are behind bars, most serving time at the Utah State Prison for other crimes.  The Tribune has reported that “Sharif and Tamer Hebeishy are in prison for drug crimes, while Sadler is serving a prison sentence for obstructing justice, unlawful sexual activity with a minor and attempted assault of a police officer.  Lopez is in prison for discharging a firearm, and Pickett is serving a sentence for attempted assault of a prisoner and aggravated assault.  Sadat Hebeishy is the only named defendant who is currently being held at the Weber County Jail.”

UPUAA charges are the result of a 2015 investigation

The UPUAA charges are the result of an investigation initiated in 2015 by the Ogden-Metro Gang Unit and Weber-Morgan Narcotics Strike Force, with help from the local FBI Violent Crimes Task Force.  The investigation began after law enforcement noticed a “troubling increase” in crimes being committed by the members of the Titanic Crip Society.  The investigation involved the use of confidential informants, wiretapped telephones and otherwise, to sustain the charges under the UPUAA.

FBI Salt Lake City Supervisory Special Agent John Barrett has said of the investigation: “Those involved in this case spent countless investigative hours, assets and expertise in an effort to combat a problem that poses a significant threat to our communities.  Violent gangs plague our streets with drugs, violence and other criminal activity and the FBI remains dedicated to disrupt and dismantle such groups.”

A “New Approach” to Gang Violence

While prosecutors have said they would not rule out bringing back the gang injunction abrogated by the Utah Supreme Court in 2013, they’ve said they intend to focus on the Titanic Crip Society leaders under the new UPUAA charges for now.  “With the Supreme Court’s guidance, we know how to properly serve a gang,”  Deputy Weber County Attorney Branden Miles said.  “We have just been focused on the gang that has recently given us the most significant criminal activity.”

Miles also noted that the new UPUAA charges against the six men are the first such charges targeting gang leaders for racketeering, although Miles did say that there had been several federal RICO cases filed against local gang leaders.  The most recent of those federal RICO cases targeted the Tongan Crip Gang in 2010, which sent many of them to federal prison, and left one Tongan Crip Member dead after he was shot by a federal marshal at the federal courthouse in Salt Lake City.  The other three previous cases, one in 2006, one in 2003, and one in 2002 saw 15 members of the Tiny Oriental Posse, as well members of the Soldiers of Aryan Culture and members of the King Mafia Disciples all charged under RICO.

Penalties accompanying UPUAA charges

Under the UPUAA, “any person who violates any provision of [the UPUAA] is guilty of a second-degree felony,” which carries a potential penalty of one to 15 years in prison and up to a $5,000 fine.  In addition to the aforementioned punishments, a person convicted under the UPUAA may be ordered to pay the state, if the case was brought by the attorney general, or to the county, if the county attorney or district attorney brought case, “the costs of investigating and prosecuting the offense and the costs of securing the forfeitures provided for” by the statute.  In lieu of any fine otherwise authorized by law, a defendant may not be fined more than twice the amount of the net proceeds the defendant received from his or her unlawful activity.  A court may also: 1) order restitution; 2) order the person to divest him or herself of any interest or control in any enterprise (as defined by the statute); 3) impose reasonable restrictions on the future activities of the person; and 4) order dissolution or reorganization of any enterprise.

UPUAA charges vs. gang injunction?

Aside from the punishments that the six men will face, the change in tactics by the Weber County Attorney’s Office is what is most noteworthy about this case.  Stymied by the Utah Supreme Court’s decision to overturn the Ogden Trece gang injunction, Weber County prosecutors have turned to the state version of RICO for the first time to do their bidding.  If successful, other gangs and/or their leaders may be targeted through state UPUAA prosecutions, adding to the strong authority already wielded by federal prosecutors under RICO.  However, if unsuccessful, prosecutors have already intimated that they may try to renew the formerly overruled gang injunction, which may accomplish the same objective as the UPUAA prosecutions, but with an injunction comes the threat that a Utah court will again find the injunction unconstitutional.  Until then, prosecutors will watch intently over the proceedings in the Titanic Crip Society case.

* Photo Cred.: sltrib.com

Copyright 2017

 

Does Bitcoin make money laundering easier?

Bitcoin ICOs are making regulators nervous

The proliferation of unregulated digital currencies has made it difficult for regulators to determine how to maintain the advantages of blockchain technology while still protecting consumers.  Cryptocurrencies are used in instant and irreversible transactions that are pseudonymous, decentralized, and encrypted.  Many new companies are springing up that incorporate blockchain tech and many of them accept cryptocurrency as part of their fundraising efforts in an “Initial Coin Offering” or ICO.

Proponents tout the public ledger system that blockchain systems use to permanently record each transaction without any opportunity to alter the ledger afterward.  This should make it more difficult for would-be money launderers, but regulators have expressed concern about this type of process being used to get around existing banking and securities protections to defraud customers.  The loose collection of laws that could apply to blockchain companies dealing in cryptocurrency can make it more difficult to find and expose bad-actors.

How ICOs can make money laundering easier

When legitimate customers participate in an ICO, a money-launderer can get them to use their exchange to turn those coins into cash.  Since they are willing to offer better prices as a premium to wash their funds, many customers are drawn to lower pricing.  The legitimate customer is paid more than he could have gotten at a regulation-friendly exchange, and the bitcoins are not as easy to trace to criminal behavior.  Criminals might also shop for an ICO that does not have robust know-your-customer practices and simply buy into the ICO themselves.  On the other hand, digital currency systems do not allow the ledger to be changed once the entry has been made.  This means that transactions are open and traceable, though they may still be tied to an anonymous pseudonym.

ICOs must comply with U.S. Securities Law.

Late last month, the Securities and Exchange Commission released an investigative report in which it said companies that planned to use distributed ledger or blockchain-enabled ways to raise capital must take appropriate steps to comply with the U.S. federal securities laws.  In the report, the SEC focused on “Initial Coin Offerings” or ICOs – where new blockchain tech companies accept cryptocurrency as part of their fundraising efforts.  The influx of ICOs recently has regulators worried that new exchanges will make it easier for money-launderers.  More exchanges mean that a criminal can shop for an exchange that is less cooperative with authorities and more lax on verification processes.

The SEC may treat an ICO as a “security”

The SEC has taken the position that any virtual organization or capital-raising entity that uses blockchain technology must also abide by the foundational principles of U.S. securities law.  In the report, they state, in part, that:

U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or the technology used to effectuate a particular offer or sale.

Many regulators don’t fully understand this emerging technology and the possibilities that it entails.  Nor do they understand that poorly planned policies could do more harm than good.  Meanwhile, with the regulatory environment is closer to the “wild-west” than “1984”, the SEC has posted guidelines to help consumers identify fraudulent investment schemes.

While the industry doesn’t have as many direct regulatory requirements, intermediaries in virtual currencies should know and research how regulations surrounding money-laundering.  If you need help or advice concerning a digital currency exchange, call attorneys who are up-to-date on SEC developments.  Call the law firm of Christensen & Jensen today.

Source: SEC investigative report

LaVerkin man pleads guilty to multi-million-dollar fraud

Laverkin Man UPUAA Violations

Utah man pleads guilty to four counts of securities fraud and one racketeering count of UPUAA

64 year old Douglas P. Beecher admitted collecting about $2.85 million in investments from at least 14 investors under false pretenses and without a legal license.  Beecther, an established accountant, promised investment with “well-vetted companies” guaranteeing an 8 percent interest rate and the ability to fully withdraw with 30 days notice.

Beecher admitted to selling stock/investment contracts despite not being licensed with the Utah Division of Securities

Many victims did receive some returns on their money, but were still owed substantial sums by last year when Beecher started sending investors letters apologizing for misusing funds and promising to repay them somehow.  Sentencing has been delayed until December to allow Beecher to make what additional restitution payments he can.  According to Assistant Attorney General Michael Palumbo, the amount still owing is about $1.05 million.

Christensen & Jensen’s Commercial Litigation practice group pursue and defend “Utah Pattern of Unlawful Activity Act” (UPUAA) claims in state and federal courts and in arbitration.  Whatever your involvement with the UPUAA, Christensen & Jensen can advise you on the best legal strategy.

Source: LaVerkin man pleads guilty to multi-million-dollar fraud

Jeanie Kay Johnson sentenced to probation and ordered to pay restitution

Jeanie Kay Johnson sentenced to probation and ordered to pay restitutionFormer Utah Valley Chamber of Commerce office manager Jeanie Kay Johnson, who pleaded guilty in June to charges in connection with her alleged embezzlement of more than $200,000, has been sentenced to 36-months of probation and ordered to pay $15,000 in restitution.

Johnson Charged With 15 Felonies, Pleads Guilty to Three

Johnson was originally charged with 15 felonies in connection with the alleged embezzlement, including engaging in a pattern of unlawful activity, theft, communications fraud and obstructing justice.  However, as part of a plea agreement, Johnson pleaded guilty to only three felony counts: reduced third-degree felony counts of theft and communications fraud, and third-degree felony obstruction of justice.  The other twelve remaining counts were dismissed.

Johnson Embezzled More Than $200k, Covered Up Fraud

Johnson was hired as an office manager by the Utah Valley Chamber of Commerce in 2005.  Prosecutors say that between February 2011 and December 2013, Johnson embezzled more than $200,000 from the Utah Valley Chamber of Commerce.  Johnson then hid the missing money for a number of years by providing false financial reports to the Chamber’s Board of Directors.  According to prosecutors, when discrepancies were discovered in the Chamber’s financial reports, Johnson logged into the Chamber’s computer system and deleted the faulty financial information in order to cover up her fraud.

Johnson Fired Following Investigation, Chamber Vows New Controls Will Prevent Similar Problem in the Future

After the Chamber undertook an investigation into Johnson’s alleged embezzlement, the Chamber fired Johnson and instituted a number of changes to its financial policies and procedures.  The Chamber said in the wake of the investigation into Johnson that it “is confident its financial situation is sound and secure with the new controls in place to ensure the proper care and handling of funds contributed by its members and sponsors.”

Johnson Pleads Guilty to 3 Felony Counts, Remaining 12, Including UPUAA charges Dismissed

As noted, Johnson agreed to plead guilty to three felonies in exchange for the government agreeing to drop the remaining 12 felony counts against her, which included 11 counts of communications fraud and one count of engaging in a pattern of unlawful activity.  Prior to her guilty plea hearing, a statement of defendant in support of guilty plea was filed with the court.  As part of the statement in advance of plea, Johnson agreed to the following elements of the crimes for which she was pleading guilty:

In Utah County, Utah, on or about January 1, 2011 and October 1, 2015, I defrauded my employer by submitting financial reports I knew to be incorrect.  The amount to which the financial reports where incorrect exceeded $5,000.  Additionally, on December 10, 2015, I deleted or destroyed documents regarding the financial reports.  I also took possession of funds belonging to my employer, in excess of $5,000, with intent to permanently deprive.

Court Tells Johnson Charges May Be Further Reduced at Sentencing if Restitution Paid in Full

As part of her guilty plea hearing, the court informed Johnson that he charges may be further reduced at sentencing, if Johnson made a $15,000 restitution payment to the Chamber prior to the date of sentencing.  Sentencing was scheduled for September 20th.

Johnson Sentenced to 36-Months Probation and Ordered to Pay $15,000 in Restitution

On September 20th, Johnson came before Judge Gary Stott for sentencing.  Judge Stott began by explaining that a Rule 11 agreement was agreed to at the guilty plea hearing, and that, based on that agreement, no jail or fine are to be imposed.  Judge Stott said that, while the court is not generally bound to the terms of a Rule 11 agreement, the court bound itself to the Rule 11 agreement in this case at the guilty plea hearing.  Finally, before imposing the court’s sentence, Judge Stott informed the parties that a “one step reduction per the plea agreement is given on charges 2 and 3,” meaning those second-degree felonies were reduced (402 reduction) to third-degree felonies as part of the plea agreement.

Judge Stott then imposed the court’s sentence on Johnson.  Judge Stott sentenced Johnson to one to five years in prison on each of the three felony counts, but suspended any term of imprisonment.  In lieu of imprisonment, Judge Stott ordered Johnson to serve 36-months of probation, as well as ordered Johnson to pay $15,000 in restitution to the Utah Valley Chamber of Commerce.  As part of her probation, Johnson “is to obey all laws, state, local and federal and is to have no further violations during the probation period. The court will accept minor traffic offenses.”  Furthermore, if Johnson is able to successfully complete her term of probation, the court said a “second step reduction is to be given on charge 2, theft, and charge three communications fraud,” thereby reducing those charges to Class A Misdemeanors.  However, if Johnson violates any of the terms of her probation, the aforementioned prison terms will be imposed.

Johnson’s Destruction of Evidence Benefited Her

An interesting side note to Johnson’s sentencing is that the $15,000 restitution order pales in comparison to the more than $200,000 Johnson stood accused of embezzling from her employer.  According to Deputy Utah County Attorney Lance Bastian, the $15,000 restitution amount was agreed to by the Utah Valley Chamber of Commerce as part of a negotiated settlement.  Bastian said that because Johnson acted to destroy much of the evidence against her, she was given many more accommodations than prosecutors wanted to give her, including the drastically reduced restitution amount.

“Once she realized they were on to her,” Bastian said, “she came in after hours and shredded documents, destroyed electronic documents, deleted emails and destroyed most of the evidence we needed to go to trial.”

Photo Cred.: digital.vpr.net

Copyright 2016

Saratoga Springs man pleads guilty to hacking United Airlines website

Saratoga Springs Mans Pleads Guilty to Hacking United Airlines WebsiteIn early May, a Saratoga Springs man was charged with hacking into the United Airlines website and stealing travel vouchers that he then sold to other people.  Ammon Cunningham was charged in 3rd District Court with various computer crimes, theft, communications fraud, and engaging in a pattern of unlawful activity, all second-degree felonies.

Cunningham Hacked United Airlines Website to Obtain Travel Vouchers

According to the charging documents, from approximately July 2012 through September 2012, Cunningham (who went by the alias Jacob Colvin) “unlawfully accessed (hacked) the United Airlines website and obtained Personal Identification (PIN) codes for Electronic Travel Certificates that had been assigned to United customers but had not yet been redeemed by those customers.”

Cunningham Used Vouchers for Himself or Sold Them to Others at Below Market Value

Prosecutors said that, once Cunningham obtained the travel vouchers, “He either used the ETCs for personal travel, or he sold them through various classified ad sites, including Craigslist and KSL.com.”  Cunningham was alleged to have used 13 certificates for himself, valued at more than $7,800.  Prosecutors also alleged that Cunningham sold some 120 vouchers to others, which were valued at more than $58,000.  Prosecutors said Cunningham sold the vouchers at discounted prices, and that one couple purchased two vouchers valued at approximately $2,400 for less than $2,000, and booked a roundtrip vacation from New Jersey to Munich with the vouchers.

Cunningham Contacted United Airlines About “Massive Hole” He Found in Website Using Alias

Interestingly, in September 2012, prosecutors said that Cunningham contacted United Airlines through email using an alias, explaining to United that he had “found a massive hole in the United.com website.”  Cunningham told United that he was willing to disclose to them this alleged “massive hole” he had found, but only if United would pay him $10,000 and supply him with first-class airfare to any place in the world for himself, his wife and, his child, the charges set forth.

Cunningham Pleads Guilty, Charge May be Reduced

Now, more than three months after he was charged, Cunningham has pleaded guilty to one count of engaging in a pattern of unlawful activity as part of a plea bargain.  As part of the plea deal, the other second-degree felonies of computer crimes, theft, and communications fraud were dismissed.  Additionally, prosecutors have agreed to hold Cunningham’s plea in abeyance, meaning that any potential prison sentence will be stayed and the charge could be reduced to a Class A misdemeanor in one year if Cunningham is able to complete 80 hours of community service, he pays restitution, and commits no additional crimes.

* Photo Cred.: youtube.com

Copyright 2016

Shurtleff’s “fixer” gets a trial date

fixer-logoAfter waiving his right to a preliminary hearing, Timothy Lawson, dubbed as former Utah Attorney General Mark Shurtleff’s “fixer,” will stand trial in April 2017 on six felony charges in Salt Lake City’s Third District Court.  Johnson stands accused of tax evasion, witness tampering, obstruction of justice, and engaging in a pattern of unlawful activity in connection with allegations of bribery and misconduct inside the attorney general’s office by Shurtleff and his successor, John Swallow.

Lawson Charged in December 2013

Lawson was originally charged in December 2013 following a months-long investigation into the alleged misconduct of Swallow and Shurtleff.  Charging documents set forth that Lawson attempted to intimidate several victims of Marc Sessions Jenson, a businessman that was acquitted of defrauding investors as part of the $3.5 billion Mount Holly ski and golf resort planned near Beaver, Utah.  Lawson has also been accused of threatening Utah businessman Darl McBride.  McBride has said that Lawson threatened to have him beat up if he did not take down a website that painted Mark Robbins, a business associate of Marc Sessions Jenson.  Shurtleff himself purportedly later met with McBride and offered to pay McBride $2 million if McBride would agree to take the sight down.

Lawson’s Close Relationship With Shurtleff and Swallow

The charging documents against Lawson also revealed the close relationship between Lawson, Shurtleff, and Swallow.  According to prosecutors, Lawson, Shurtleff, and Swallow visited Jenson at his Southern California villa in 2009.  Swallow and Lawson also allegedly engaged in more than 680 text messages and phone calls between the two from April 2009 and March 2013, conversing about everything from holiday plans to Swallow’s 2012 election to the FBI’s investigation into Swallow.

Lawson was a Prolific Campaign Fundraiser for Shurtleff

Prosecutors say the evidence against Lawson shows that he was a prodigious campaign fundraiser for Shurtleff, and emails from 2007 and 2008 show that Lawson and Shurtleff discussed fundraisers and meetings where Shurtleff would receive significant campaign contributions.  Lawson also allegedly connected Shurtleff to several large donors, including Pre-Paid Legal Services, Mentoring of America, and St. George businessman Jeremy Johnson, who, along with his associates, gave some $200,000 to Shurtleff’s various campaigns.

AG Personnel Questioned Shurtleff and Swallow’s Involvement with Lawson

Shurtleff and Swallow’s involvement with Lawson, which has been alleged to go far beyond campaign fundraising, raised eyebrows at the Attorney General’s office, including from Swallow’s co-deputy, Kirk Torgensen.  According to Torgensen, he wrote to Swallow asking, “Why are we dealing with this guy [Lawson]?  We cannot ethically deal with this guy outside of Jenson’s counsel.  This is inappropriate for Lawson to be doing this.”  However, it appears from the charging documents that Swallow did not heed Torgensen’s advice as it related to Lawson.

UPUAA Charge Against Lawson Forewarned of Charges Against Shurtleff and Swallow

The charges against Lawson were the result of months of hard work by Salt Lake County District Attorney Sim Gill, Davis County District Attorney Troy Rawlings, and investigators from the FBI and the Utah Department of Public Safety.  At the time of Lawson’s arrest, Troy Rawlings said, “The very nature of the [racketeering] charge means Mr. Lawson wasn’t acting alone or in a vacuum.  However, nobody else has been charged to date and all inferences beyond that point would be unfair to comment on.”  While Rawlings would not make any further comment about Lawson’s alleged accomplices, we know now that both Shurtleff and Swallow were subsequently charged with similar crimes, including engaging in a pattern of unlawful activity.  Shurtleff’s case was recently dismissed, while the case against Swallow marches on.

Lawson Waives Preliminary Hearing

In April, Lawson appeared in Third District Court for what was supposed to be a three-day preliminary hearing.  However, at the outset of the hearing, Lawson waived his right to a preliminary hearing, instead opting to go to trial.  The court thereafter set an arraignment for June 20th.  Lawson pleaded guilty to all of the charges against him at the June 20th hearing.  A status hearing was set for August 15th to discuss further issues in the case.

Lawson’s Trial Set for April 2017

As noted, at the August 15th hearing, the court set a trial date for Lawson’s case in April 2017.  The trial is scheduled for six-day period, beginning April 13, 2017.  Both Shurtleff and Swallow may be called as witnesses in Lawson’s trial.

Preliminary Hearing Set in Social Security Case Against Lawson

Also on August 15th, the court set a November 23rd date for a preliminary hearing in a Social Security fraud case against Lawson that was filed earlier in 2016.  In that case, prosecutors have charged Lawson with communications fraud, theft, and making false or inconsistent statements for allegedly lying to the Social Security Administration.  Prosecutors say that between April 2012 and September 2013, Lawson twice told administrative judges from the Social Security Office of Disability Adjudication and Review that he had been unemployed or worked fewer than five hours a week.  The claims resulted in a January 2014 award of $86,810 to him and his family, court papers say.  Prosecutors contend that state workforce services records show that in 2009 and 2010, Lawson reported owning a share in a Marshall Islands-based hovercraft business and operated a gluten-free bakery.

* Photo Cred.: fixercomic.com

Copyright 2016

Ex-Utah Valley Chamber of Commerce officer manager pleads guilty to fraud and other charges

 

bank-finance-sold-through-fake-documentsIn early 2015, fifteen felonies were  charged against former Utah Valley Chamber of Commerce office manager Jeanie Kay Johnson, who stood accused of embezzling more than $200,000.  Johnson was charged with one count of engaging in a pattern of unlawful activity, one count of theft, 12 counts of communications fraud, and one count of obstructing justice, all second degree felonies with the exception of the obstruction of justice charge, which is a third-degree felony.

Johnson Falsified Financial Information to Hide Missing Money

According to prosecutors, Johnson was hired by as an office manager, receptionist, and finance manager by the Utah Valley Chamber of Commerce in 2005.  Prosecutors said that Johnson thereafter embezzled more than $200,000 from the Chamber between February 2011 and December 2013 and “was able to hide the missing money for years by providing false financial information in the monthly financial reports for the Board of Directors.”

When Discrepancies Were Revealed, Johnson Deleted Financial Information to Hide Her Fraud

State prosecutors further alleged that, when any discrepancies were discovered in the Chamber’s financial reports, Johnson went into the Chamber’s computer system on December 10, 2013 and “deleted the financial information in an effort to hide her actions.”  Prosecutors said Johnson illegally obtained the large sum of money through fraudulent reimbursements, unauthorized checks, and false vacation payouts.

Johnson Fired Following Internal Investigation

The Utah Valley Chamber of Commerce fired Johnson in 2014 after an internal investigation purportedly revealed discrepancies in the Chamber’s financial records.  In a written statement, the Chamber said:

During the past year, much has been done to update the Chamber’s financial processes. With the additional help of outside experts, the Chamber implemented many new controls and processes to secure the Chamber’s financial accounts, information, communications and records.  The Chamber is confident its financial situation is sound and secure with the new controls in place to ensure the proper care and handling of funds contributed by its members and sponsors.  While this situation is unfortunate, the Chamber believes it is now stronger and better positioned to succeed as a result.

Johnson Pleads Guilty to Three Felonies

Now, more than 18 months after she was charged, Johnson has pleaded guilty.  As part of her guilty plea, Johnson agreed to plead guilty to one count of communications fraud, one count of theft, and one count of obstruction of justice.  The remaining 11 counts for communications fraud, as well as the charge for engaging in a pattern of unlawful activity, were dismissed as part of Johnson’s plea deal.

Johnson’s Charges May be Reduced

Furthermore, the court has said Johnson’s charges may be reduced at sentencing on September 20th if Johnson makes a $15,000 restitution payment before sentencing.  Johnson’s charges may further be reduced in three years’ time if she complies with all of the terms of her probation.

* Photo Cred.: diplomafraud.com

Copyright 2016

Titanic Crip Society sought to be dismantled under UPUAA

dt.common.streams.StreamServerThe Weber County Attorney’s Office announced in late June that it will prosecute six high profile members of the street gang the Titanic Crip Society.  The six men were charged with engaging in a pattern of unlawful activity under the Utah Pattern of Unlawful Activity Act (“UPUAA”), as well as other charges ranging from assault, aggravated assault, and aggravated robbery.  The UPUAA charges are similar to charges under the UPUAA’s federal counterpart, the Racketeer Influenced and Corrupt Organizations Act, better known as RICO.

Prosecutors Hope UPUAA Charges Will Stymie Gang Violence

According to a recent article in the Salt Lake Tribune, the Titanic Crip Society has had a presence in northern Utah since the 1990s, and that their membership has fluctuated between 10 and 20 members.  Weber County prosecutors have said that they hope the new UPUAA charges will help to stymie the activities of the gang, the Tribune article said.

Deputy Weber County Attorney Branden Miles has said of the new charges against six members of the Titanic Crip Society: “We believe a targeted prosecution of their leadership has the potential to disrupt their activities and terminate their existence as a criminal street gang.”  Miles also said that the new UPUAA charges represent “a new approach” for Weber County prosecutors in response to gang crime.

New UPUAA Charges Represent First State Racketeering Case Against Gang Leaders in Utah

The charges against the six men – Tamer Ahmed Hebeishy, 32, Sharif Ahmed Hebeishy, 35, Sadat Ahmed Hebeishy, 34, Daniel Ray Lopez, 25, Brock Adam Pickett, 28, and Jaron Michael Sadler, 21 – represent the first such charges targeted at a street gang as a whole since the Utah Supreme Court dissolved a Ogden city-wide gang injunction against the main rivals of the Titanic Crip Society, the Ogden Trece, in 2013.

According to the charging documents, the six men charged were Titanic Crip Society leaders, which the gang refers to as “Big Homies.”  As “Big Homies,” the gang’s leaders are removed from the day-to-day criminal activity of the gang that is carried out by younger members (“Little Homies”) on the directions of the leaders.  Prosecutors have said that the three Hebeishy brothers charged under the UPUAA are most likely the longest-standing members of the Titanic Crip Society, and that, because of the way the gang is structured, the leaders “are able to observe/portray a ‘gangster’ lifestyle while not fully exposing themselves to the risks of criminal charges.”  However, that has all changed with the new charges filed by the Weber County District Attorney’s Office.

Currently, all six of the men charged under the UPUAA are behind bars, most serving time at the Utah State Prison for other crimes.  The Tribune’s article reports that “Sharif and Tamer Hebeishy are in prison for drug crimes, while Sadler is serving a prison sentence for obstructing justice, unlawful sexual activity with a minor and attempted assault of a police officer.  Lopez is in prison for discharging a firearm, and Pickett is serving a sentence for attempted assault of a prisoner and aggravated assault.  Sadat Hebeishy is the only named defendant who is currently being held at the Weber County Jail.”

UPUAA Charges are Result of Joint Investigation Initiated in 2015

The UPUAA charges are the result of an investigation initiated in 2015 by the Ogden-Metro Gang Unit and Weber-Morgan Narcotics Strike Force, with help from the local FBI Violent Crimes Task Force.  The investigation began after law enforcement noticed a “troubling increase” in crimes being committed by the members of the Titanic Crip Society.  The investigation involved the use of confidential informants, wiretapped telephones and otherwise, to sustain the charges under the UPUAA.

FBI Salt Lake City Supervisory Special Agent John Barrett has said of the investigation: “Those involved in this case spent countless investigative hours, assets and expertise in an effort to combat a problem that poses a significant threat to our communities.  Violent gangs plague our streets with drugs, violence and other criminal activity and the FBI remains dedicated to disrupt and dismantle such groups.”

A “New Approach” to Gang Violence, Prosecutors Say

As noted, the new UPUAA charges against the six men represent what Weber County prosecutors call a new approach to curb gang violence.  While prosecutors have said they would not rule out bringing back the gang injunction abrogated by the Utah Supreme Court in 2013, prosecutors have said for now that they intend to focus on the Titanic Crip Society leaders under the new UPUAA charges.  “With the Supreme Court’s guidance, we know how to properly serve a gang,”  Deputy Weber County Attorney Branden Miles said.  “We have just been focused on the gang that has recently given us the most significant criminal activity.”

Miles also noted that the new UPUAA charges against the six men are the first such charges targeting gang leaders for racketeering, although Miles did say that there had been several federal RICO cases filed against local gang leaders.  The most recent of those federal RICO cases targeted the Tongan Crip Gang in 2010, which sent many of them to federal prison, and left one Tongan Crip Member dead after he was shot by a federal marshal at the federal courthouse in Salt Lake City.  The other three previous cases, one in 2006, one in 2003, and one in 2002, saw 15 members of the Tiny Oriental Posse, as well members of the Soldiers of Aryan Culture and members of the King Mafia Disciples all charged under RICO.

Penalties Under the UPUAA

Under the UPUAA, “any person who violates any provision of [the UPUAA] is guilty of a second degree felony,” which carries a potential penalty of one to 15 years in prison and up to a $5,000 fine.  In addition to the aforementioned punishments, a person convicted under the UPUAA may be ordered to pay the state, if the case was brought by the attorney general, or to the county, if the county attorney or district attorney brought case, “the costs of investigating and prosecuting the offense and the costs of securing the forfeitures provided for” by the statute.  In lieu of any fine otherwise authorized by law, a defendant may not be fined more than twice the amount of the net proceeds the defendant received from his or her unlawful activity.  A court may also: 1) order restitution; 2) order the person to divest him or herself of any interest or control in any enterprise (as defined by the statute); 3) impose reasonable restrictions on the future activities of the person; and 4) order dissolution or reorganization of any enterprise.

UPUAA Charges or a Gang Injunction?

Aside from the punishments the six men will face, the change in tactics by the Weber County Attorney’s Office is what is most noteworthy about this case.  Stymied by the Utah Supreme Court’s decision to overturn the Ogden Trece gang injunction, Weber County prosecutors have turned to the state version of RICO for the first time to do their bidding.  If successful, other gangs and/or their leaders may be targeted through state UPUAA prosecutions, adding to the strong authority already wielded by federal prosecutors under RICO.  However, if unsuccessful, prosecutors have already intimated that they may try to renew the formerly overruled gang injunction, which may accomplish the same objective as the UPUAA prosecutions, but with an injunction comes the threat that a Utah court will again find the injunction unconstitutional.  Until then, prosecutors will watch intently over the proceedings in the Titanic Crip Society case.

* Photo Cred.: sltrib.com

Copyright 2016

Shane Baldwin sentenced to up to 60 years in prison

Shane BaldwinPreviously, utahricolaw.com reported on the guilty plea of Dwight Shane Baldwin, a Layton businessman accused of bilking money from investors for purported real-estate based ventures for Baldwin’s company and to fund a reality TV show.  Now, Baldwin faces up to 60 years in prison after being sentenced in Utah state court.

Judge Blanch Sentences Baldwin to up to 60 Years in Prison

Third District Court Judge James T. Blanch sentenced Baldwin to six terms of one to 15 years at the Utah State Prison.  Four of those six terms imposed by Judge Blanch are to run consecutively, meaning Baldwin could be in prison for four to 60 years.  Those four terms relate to the securities fraud charges that Baldwin agreed to plead guilty to in exchange for the State dropping eight other charges.  The other two sentences, one for theft and one for engaging in a pattern of unlawful activity, will run consecutively with the others.

Baldwin Also Sentenced for Assaulting Jailer

In addition to imposing the six one to 15 year prison terms on Baldwin, Judge Blanch also sentenced Baldwin to jail time served for attacking a Salt Lake County jailer in November 2015.  A probable cause affidavit had alleged that Baldwin became angry and shoved, punched, and scratched and tried to gouge the eye of the jailer.

FBI Investigation Leads to Charges Against Baldwin

The FBI began investigating Baldwin in 2013 after receiving reports that the founder of Salt Lake City-based Silverleaf Financial may have been committing investment fraud since 2010 against several investors in a series of loan and property investment deals.  In a probable cause affidavit, the FBI said it gathered evidence at one point by sending in an undercover agent to participate in one of the investment negotiations.

The original charging documents filed by the State alleged Baldwin, from 2010 to 2013, solicited investments from individuals for so-called real estate ventures to be undertaken by Baldwin’s company.  One such investment scheme hatched by Baldwin persuaded investors to pour $200,000 into a California toy company, the State said.  However, according to the State, more than half of that $200,000 was used for unrelated expenses that to other Baldwin companies and/or for personal expenses.  The State alleged that another of Baldwin’s schemes involved solicitation of approximately $500,000 from investors to help fund a $1.7 million ABC reality TV series.

Baldwin Previously Pleaded Guilty to Similar Conduct in 2008

What’s more is that Baldwin had actually run into trouble with state securities regulators and law enforcement officials previously in 2007 for similar types of investment activities.  However, at that time, Baldwin avoided jail time by entering into a plea bargain.  In 2008, Baldwin entered into pleas in abeyance on two felonies and was ordered to pay approximately $200,000 in restitution to victims of his investment activities.  Baldwin fulfilled those terms and the charges were subsequently dismissed in 2011, according to court records.

Statements from Utah’s Attorney General

Following the charges in 2015, the Utah Attorney General’s Office released a statement on the investigation and charging of Baldwin.  In the statement, Attorney General Sean Reyes was quoted as saying:

This is precisely the type of case that our office will prosecute aggressively and if the allegations are proven, it is a clear example why we will soon launch a White Collar Crime Registry.  Every time I see innocent people, no matter their age or financial situation, who hand over their hard-earned money to alleged fraudsters, my commitment to protect Utah citizens deepens.  It is why we emphasize that people should verify the legitimacy of a deal or offering, before ever trusting anyone, even close friends and family, with money to invest.  We appreciate the fine investigative work on this case performed by our partners, the Utah Division of Securities and the Federal Bureau of Investigation.  We also thank the United States Attorney’s Office for inviting us to lead the prosecution of this case.  Of course, we presume all defendants are innocent unless we can prove our case and we will continue to pursue this matter in a professional and responsible manner.

Now, following Baldwin’s sentencing, the Attorney General’s Office has released another statement.  This time, Sean Reyes was quoted as saying:

It continues to be important that people verify the legitimacy of any deal or offering before ever trusting anyone, even close friends and family, with money to invest.  This case is an excellent example of the damage that can be wrought upon innocent victims when trust is violated.  We hope citizens will take great precautions, including checking the White Collar Fraud Offender Registry, when making investments of any sort.  I cannot emphasize this enough.  Fraud destroys lives.  Fraud decimates families and businesses.  Utahans must do everything in their power to protect themselves while we continue to aggressively investigate and prosecute fraudsters.  We appreciate the fine work and cooperation of our partners, the Utah Division of Securities and the Federal Bureau of Investigation.  We also thank the United States Attorney’s Office for inviting us to lead the prosecution of this case.

Baldwin’s Potential 60 Year Sentence Serves as a Cautionary Tale

Baldwin’s case serves a cautionary tale for those engaged in the practice of soliciting investors for business ventures, including that those solicitations may result in serious felony charges, which when numerous enough can lead to a charge for engaging in a pattern of unlawful activity.  A charge for engaging in a pattern of unlawful activity under the Utah Pattern of Unlawful Activity Act (“UPUAA”) is a second degree felony, which is punishable by one to 15 years in prison, and up to a $10,000 fine.  In addition to the penalties prescribed by law, a court may impose other additional penalties on a defendant, including: ordering restitution, ordering the defendant to divest him or herself of any interest in the enterprise for which the defendant was charged, or order the dissolution or reorganization of that enterprise.

Contact our UPUAA Attorneys Today

If you or someone you know has been charged with engaging in a pattern of unlawful activity, or have been charged with a white collar crime or other non-white collar crime, please contact our white collar and criminal defense attorneys today.  Our UPUAA attorneys have experience defending claims in state district courts, as well as state appellate courts.  Our UPUAA attorneys may be reached confidentially by email at kporter@chrisjen.com, by phone at (801) 323-5000, or through our contact form.

Photo Cred.: standard.net

Copyright 2016