Ex-Utah County Commissioner charged with communications fraud and engaging in a pattern of unlawful activity after he allegedly posed as LDS Church leader

1661897Former Utah County Commissioner Gary Jay Anderson and businessman Alan McKee have been charged with three counts of communications fraud and one count of engaging in a pattern of unlawful activity for allegedly posing as LDS Church leaders in an attempt to defraud a construction company out of $1.2 million.

All four charges filed against Mr. Anderson and Mr. McKee in 3rd District Court by the Utah Attorney General’s Office are second-degree felonies, which carry the potential penalties of one to 15 years in prison.

Anderson and McKee Posed as LDS Church Officials From 2011 to 2015

According to an article from the Salt Lake Tribune, investigators wrote in the charging documents that Mr. Anderson and Mr. McKee impersonated LDS Church officials from 2011 to 2015 in order to attract investors to what the pair said was a plan to establish a rail line and an industrial park on LDS Church land in Elberta, Utah.

Apparently, employees of the LDS Church’s land management corporation have acknowledged that they discussed a potential rail service with Mr. McKee, but that the proposal stalled in 2013 after Mr. McKee failed to follow through.  Mr. McKee had been introduced to the Church’s officials by several Utah County commissioners, including Mr. Anderson.

McKee and Anderson Defraud Ames Construction

During the same time Mr. McKee was in talks with the LDS Church, he was also corresponding with Ames Construction.  According to investigators, Mr. McKee sent Ames letters on LDS Church letterhead, which purported to be from people connected to the Church and its land management corporation.  The letters allegedly discussed the industrial park and showed support for Mr. McKee’s involvement in the project, even going so far as to praise Mr. McKee’s earlier work on the project.

As part of the correspondence with Ames was a 2013 email from a Yahoo account that Mr. McKee claimed belonged to “Eric Peling,” who supposedly worked for the Church’s land management company.  The email apologized that the substance of the communication was not on official letterhead, but that the LDS Church was “making financial payouts” in connection to the rail line and set meetings to finalize a $4 million payout from the Church to Ames Construction and Mr. McKee.

Ames’ regional vice president, Mark Brennan, met with Mr. McKee and someone who identified himself as “Mr. Peling,” but LDS Church officials later said there is no church employee by that name, investigators claimed.

While Mr. McKee was trying to garner Ames participation in the rail line and industrial park, Mr. McKee was also speaking with Mr. Brennan about a personal business deal to purchase the LDS Church’s surplus farm equipment at a discount.  Mr. McKee claimed to be a “preferred buyer” for the Church’s equipment and said he could act as a go-between for Mr. Brennan and the Church.  Mr. Brennan paid Mr. McKee $110,000 for the equipment, but it was never delivered.

Throughout the negotiations with Mr. McKee, Mr. Brennan received numerous phone calls from a man identifying himself as “Stevenson,” which continually reassured Mr. Brennan that the Church was committed to the pending rail line project and the equipment deal.  However, after listening to two of the recorded conversations between Mr. Brennan and “Stevenson,” investigators determined that the voice of the caller was actually Mr. Anderson.

Anderson and McKee Defraud McKee’s Friend and Fellow Churchgoer

In addition to defrauding Ames, investigators claim that Mr. McKee also defrauded a fellow churchgoer out of $750,000 after Mr. McKee claimed to be a “preferred buyer” of foreclosed farm and construction equipment.  However, the business that Mr. McKee said he could buy the equipment from never existed.  Even still, someone claiming to be the president of the company called Mr. McKee’s friend and sent him numerous text messages regarding the purchase of the equipment.  Again, investigators determined that the purported president was in fact Mr. Anderson.

Investigators seized the cellphones of Mr. McKee and Mr. Anderson and found text messages between them, coordinating communications with the alleged victims.  Mr. Anderson at times told the victims he was Mr. McKee’s attorney; he later told investigators he was not Mr. McKee’s attorney, but received $10,000 per month from Mr. McKee for “consulting” services.

Investigators reviewed Mr. McKee and Mr. Anderson’s finances and found several transactions between them.  They found that Mr. McKee was shifting money around his accounts and accounts to his business, Ophir Minerals and Aggregate, LLC.  The company was named by the Utah County Commission as “business of the year” in 2011, while Mr.  Anderson was serving on the Utah County Commission.

LDS Church Releases Statement on Charges

LDS Church spokesman Eric Hawkins released a prepared statement Monday regarding the charges.

“Two individuals have been charged with fraud for claiming to be or represent (former) Bishop Gary E. Stevenson during their business dealings.  Elder Stevenson was serving as the presiding bishop of the church at that time.  He does not know these individuals, has never spoken with them, and was completely unaware of their activities,” Hawkins said in the statement.  “The church alerted authorities as soon as it learned of the matter, and Elder Stevenson has provided a statement to prosecutors confirming he was not involved in this brazen scheme, which attempted to misuse the good name of the church and the office of the presiding bishop,” Hawkins said.

* Photo cred.: deseretnews.com

Apple stock scheme lands Utah man in prison

wall-street-HPursuant to the Utah Pattern of Unlawful Activity Act (“UPUAA”), the state must prove that an individual engaged in a “pattern of unlawful activity.”  As defined by the statute, a “‘[p]attern of unlawful activity’ means engaging in conduct which constitutes the commission of at least three episodes of unlawful activity.”  The UPUAA lists approximately 64 violations of Utah law that constitute unlawful activity for purposes of the UPUAA.  A Violation of the Utah Uniform Securities Act is included within the offenses that constitute “unlawful activity” under the UPUAA.

In a case that has involved an investigation and lawsuit by the Securities and Exchange Commission (“SEC”), a federal prosecution for obstruction of justice and providing false information, and state charges for securities fraud and engaging in a pattern of unlawful activity, Third District Judge Elizabeth Hruby-Mills recently sentenced Roger S. Bliss to a minimum of four years in the Utah State Prison.  Mr. Bliss’ sentence follows his guilty plea to four counts of communications fraud and one count of engaging in a pattern of unlawful activity.  Judge Hruby-Mills said that Mr. Bliss’ four year sentence will run consecutively with his one-year prison term imposed from federal court as it relates to the charges of obstruction of justice and providing false information.

SEC Files Suit

In February 2015, the SEC sued Mr. Bliss in Utah federal court.  In its complaint, the SEC alleged Mr. Bliss solicited investors by offering them a membership in purported investment club.  Mr. Bliss communicated to potential investors that he could day trade (speculation in securities) Apple stock for annual returns of 100 to 300 percent and that he had not lost money on a day trade in the last six years, the SEC said.

In order to further entice investors, Mr. Bliss told them that he was trading more than $300 million in assets.  However, the SEC has said that Mr. Bliss’ brokerage account actually showed losses of at least $3 million over a three year period, with an ending balance of only $32,000.

According to court papers filed by the SEC, Mr. Bliss allegedly structured the scheme as an investment club following a meeting with attorneys, whereby the attorneys told him that structuring the scheme as an investment club would keep him from having to register as an investment adviser or a broker-dealer.

SEC Obtains TRO and Asset Freeze

On the same day the SEC lawsuit was filed, a Utah federal court also entered a temporary restraining order and asset freeze against Mr. Bliss.  In July 2015, the SEC filed a motion for an order to show cause, claiming that Mr. Bliss had violated the court’s asset freeze when he failed to disclose ownership of a catamaran and had the boat removed from his property five days after the asset freeze was entered.  In response to the SEC’s motion, Mr. Bliss said in a sworn declaration that his brother-in-law, Kevin Fortney, who had not been named in the SEC’s lawsuit, owned the boat but stored it at his house in Bear Lake during the off-season.

Mr. Bliss Held in Contempt

Following the statements in Mr. Bliss’ sworn declaration, U.S. District Judge Robert J. Shelby held Mr. Bliss in civil contempt.  Judge Shelby stayed any sanctions against Mr. Bliss, and, instead, referred the matter to the U.S. Attorney’s Office for the District of Utah for a consideration of whether criminal charges should be brought against Mr. Shelby for criminal contempt.

Mr. Bliss and Mr. Fortney Indicted in Utah Federal Court

In August 2015, Mr. Bliss and Mr. Fortney were indicted by a federal grand jury for allegedly lying about the ownership of the catamaran during the SEC’s investigation.  Mr. Bliss ultimately pled guilty to the federal charges, and was sentenced to a one-year prison term.

As previously noted, State charges were also filed against Mr. Bliss in connection with his alleged Apple investment scheme, including four counts of securities fraud and one count of engaging in a pattern of unlawful activity.  The State was able to include a charge for engaging in a pattern of unlawful because they had alleged four “episodes” of securities fraud attributable to Mr. Bliss.  A charge under the UPUAA is a second degree felony, but also carries the potential penalties of cost of suit, restitution, disgorgement, or other reasonable restrictions that may be placed on the future activities or investments of the individual, including ordering the dissolution or reorganization of any enterprise as defined by the UPUAA.

Mr. Bliss Ordered to Pay Restitution in Addition to Prison Time

Mr. Bliss ultimately pled guilty to the State charges, which led to the court imposing a four-year sentence against him.  In addition to sentencing Mr. Bliss to prison, the court also ordered him to pay approximately $21 million in restitution to the victims of his securities scheme.

Utah Supreme Court holds that UPUAA allows “prevailing” plaintiff to recover “reasonable attorney’s fee” in Westgate v. Consumer Protection Group

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The Utah Pattern of Unlawful Activity Act (“UPUAA”) provides a private right of action for persons “injured by a pattern of unlawful activity.”  As part of this private right of action, the statute entitles a “prevailing party” to “recover … a reasonable attorney’s fee.”

In a recent appeal to the Utah Supreme Court handled by Christensen & Jensen (“C&J”) attorney Karra Porter, the Supreme Court held that while the Utah Uniform Arbitration Act (“UUAA”) does not authorize an arbitration panel to award attorney fees for court proceedings confirming the panel’s decision, the UPUAA allows prevailing plaintiffs to recover a reasonable attorney fee.  Accordingly, the Supreme Court confirmed the panel’s award of attorney fees expended during the arbitration, as well as granting the appellee’s request for attorney fees associated with the appeal.

On appeal, Westgate argued that the arbitration panel had no authority to award attorney fees for the court proceedings confirming the panel’s decision, and that the arbitration panel manifestly disregarded the law by awarding attorney’s fees in excess of the amount Consumer Protection Group (“CPG”) agreed to pay their lawyer.

C&J has been pursuing this case for more than a decade now.  In 2002, Westgate sued CPG for various alleged torts and breaches of contract.  Then, in 2005, CPG raised counterclaims under the UPUAA.  Under the UPUAA, a party may force arbitration of fraud claims, which Westgate took advantage of in 2008.

In 2010, an arbitration panel resolved the UPUAA claims in CPG’s favor.  However, before the arbitration panel ruled on CPG’s request for attorney fees, Westgate discovered that one of the arbitrators was a first cousin of a shareholder at the law firm representing CPG.  As a result, Westgate moved the district court to vacate the panel’s decision.  The district court granted Westgate’s motion, CPG appealed, and the Supreme Court reversed, but without ruling on CPG’s request for attorney fees.

The case then went back to the arbitration panel, which declined to award fees for pre-award arbitration litigation, but ordered approximately $558,810.30 for work performed during the arbitration and approximately $88,829.50 for work in what the panel called “post-arbitration proceedings.”  Westgate thereafter again moved the district court to vacate the panel’s decision, challenging the fee awards.  The district court denied Westgate’s motion, and Westgate appealed to the Utah Supreme Court.

As to whether the arbitration panel exceeded the scope of its authority by awarding attorney fees for post-arbitration proceedings, the Supreme Court held that the section 122 of the UUAA does not authorize an arbitration panel to award post-arbitration fees.  According to the Supreme Court:

The decision-makers most familiar with CPG’s attorneys’ work during the confirmation proceedings and resulting appeal were the courts that presided over those confirmation proceedings and resulting appeal. We think it best to assign those courts sole responsibility for granting attorney fees in those proceedings, and we therefore conclude that the panel exceeded its authority when it ordered Westgate to pay post- arbitration attorney fees.

In relation to the second issue raised on appeal, namely whether the arbitration panel acted in manifest disregard of the law by allowing CPG to collect attorney fees in excess of the contracted amount, the Supreme Court held that the arbitration panel did not manifestly disregard the law in awarding attorney fees to CPG as the prevailing party.  In fact, the Supreme Court said that not only was the panel allowed to make such an award, but also that such an award was compelled under the UPUAA.

Instead of challenging the panel’s authority to award fees for arbitration, Westgate challenged the method the panel used to calculate the fees it awarded to CPG.  The panel determined that the reasonable fee award to CPG was approximately $558,810.30, which it arrived at by multiplying reasonable hours by a reasonable market rate.  Westgate asserted that the panel’s calculations were in error, and that Utah law required the panel to cap the attorney fees at the amount that CPG contracted to pay.  The Supreme Court disagreed, holding:

Ultimately, because the UPUAA does not expressly limit a plaintiff’s attorney fees to those actually incurred and there is no controlling Utah case law interpreting this specific question, the arbitration panel did not commit an obvious error in its calculation of reasonable attorney fees. The district court’s order confirming the panel’s award of $558,810.30 is affirmed.

Finally, the Supreme Court addressed CPG’s request for attorney fees as it related to the instant appeal.  There, the Supreme Court granted CPG’s request for attorney fees as it related to the appeal, finding that the UPUAA authorized attorney fees related to an appeal.

What does it mean to “devise” a scheme to defraud under the Utah communications fraud statute? Utah Court of Appeals affirms communications fraud conviction in State v. Hawkins.

2016-01-CourtofAppealsIn order to sustain a charge under the Utah Pattern of Unlawful Activity Act (“UPUAA”), the State must prove that a defendant engaged in “at least three episodes of unlawful activity.”  The UPUAA includes “communications fraud” within its definition of “unlawful activity” for purposes of the statute.

In a recent case before the Utah Court of Appeals, the appellate court affirmed the conviction of Clair Rulon Hawkins for communications fraud arising out of a fraud scheme related to real property near Park City, Utah.  Mr. Hawkins was initially charged with three counts of communications fraud and one count of engaging in a pattern of unlawful activity, but only the two counts of communications fraud went forward to trial.  As a result, the State could not sustain its UPUAA charge against Mr. Hawkins.

A jury acquitted Mr. Hawkins on the first count of communications fraud, but convicted him on the second.  The second count alleged that the victim owned a business in Colorado, which was ultimately sold, realizing approximately $1 million in profit.  The victim spoke with Ms. Chapple, VP and a Director of Empire Homes, over the phone and arranged a time where he could come to Utah to meet with Empire.

When he met with the victim, Mr. Hawkins provided certain assurances regarding the victim’s potential investment in the development.  Upon these assurances, the victim decided to purchase two lots in the development, putting approximately $423,000 down on each lot.  However, nothing went as promised, and the victim lost his investment.

Following the trial, Mr. Hawkins appealed his conviction.  On appeal, Mr. Hawkins, among other things, argued that the trial court erred in its determination that sufficient evidence established that he “devised” the alleged fraudulent scheme, because, as he put it, the district court equated “participation” in a scheme to having “devised” the scheme.

In its opinion, the Court of Appeals explained that “the trial evidence showed that Hawkins devised a scheme to entice the victim to buy property based on a promise that Empire Homes would take care of everything.”  “In furtherance of that scheme,” Mr. Hawkins made a number of representations to the victim that were simply not true, including that utilities were not a problem, funding was not a problem, and Empire Homes had an insurance policy that would cover any loss should the home they built sell for less than promised.

To further persuade the victim, the court found that Mr. Hawkins represented to the victim that the developer would treat the victim and his family to a cruise when in fact the victim’s money was used to pay for the cruise.  Lastly, after the victim had purchased one of the lots, Mr. Hawkins created and had the victim sign a risk disclosure statement, which effectively revoked every promise Mr. Hawkins made to the victim.

Upon the foregoing evidence, the Court of Appeals concluded:

From the evidence, the jury could reasonably conclude that Hawkins knew that no private trust existed to fund the Deer Canyon Development but that he nevertheless affirmatively represented the existence of such a trust; that Hawkins knew that utilities presented a problem, but affirmatively represented they did not; that Hawkins knew that the developer would not pay for a Disney cruise, but represented that it would; that Hawkins knew that no insurance policy guaranteed the sale price of the homes; and that Hawkins knew the falsity of everything he promised, but promised it all anyway and then conceived a risk disclosure statement repudiating his promises in an effort to shield himself from liability. Moreover, from evidence of Hawkins’s role in every stage of the scheme, the jury could reasonably conclude that he not only acted to execute someone else’s scheme, but that he also had a hand in devising it.

SECURE Strike Task Force Arrests Man for Selling Counterfeit Merchandise

Recently, the Utah County Attorney General’s Office SECURE Strike Force arrested 28-year-old Marcelo Christian Veizaga for selling counterfeit items to unsuspecting individual throughout Salt Lake County over a period of several months.

Marcelo Christian Veizaga ArrestIts likely that you’ve seen someone selling marked down items on the Internet or out of the trunk of their car in a parking lot. You also probably wondered whether those sales were legal or if these products were even what the seller said they were. Recently, the Utah County Attorney General’s Office SECURE Strike Force arrested 28-year-old Marcelo Christian Veizaga for selling counterfeit items to unsuspecting individual throughout Salt Lake County over a period of several months. Some of the counterfeit items that Mr. Veizaga was purportedly selling included Beats by Dre headphones, Instyler hair styling devices, and Beachbody workout DVDs. He is also alleged to have been selling a prescription drug that is only available through a licensed pharmacist.

According to the news report, SECURE had been investigating Mr. Veizaga for several weeks before they made the arrest. Sgt. Kevin Pepper, a member of the SECURE Strike Force, said, “Some of the products like the beat headphones they aren`t going to be the same quality as the actual product itself so these people even though they are paying half price they`re getting ripped off, and that he suspected it’s coming from Asia, an Asian country according to some of the boxes, I suspect it`s coming from China.”

As part of their investigation, SECURE filed for three separate search warrants, one for Mr. Veizaga’s apartment, one for his storage unit, and the other for his car. Execution of the search warrants revealed boxes of counterfeit merchandise and thousands of dollars in cash in all three locations. In conjunction with his illegal activity, Mr. Veizaga has been charged with engaging in a pattern of unlawful activity, failure to disclose the origin of recording, criminal simulation, communications fraud and distributing prescription drugs without a license, all of which are felonies.

Statute of limitations on communications fraud

The defendant in the Steve Turley case recently won a dismissal of three counts of Communications Fraud (frequently used as predicate offenses in a Utah Pattern of Unlawful Activity Act cases) based on the statute of limitations. The Provo Daily Herald’s summary of the case and ruling is
.

The original Motion to Dismiss, Opposition memorandum, and Reply memorandum are attached here:

TurleyMTD

TurleyMTDOpp

TurleyMTDReply

Pattern of “unlawful” activity

To show a pattern of *unlawful* activity under the Act, the plaintiff or prosecutor must show a pattern not just of illegal conduct, but only of certain specified crimes. They are:

(a) any act prohibited by the criminal provisions of Title 13, Chapter 10, Unauthorized Recording Practices Act;

(b) any act prohibited by the criminal provisions of Title 19, Environmental Quality Code, Sections 19-1-101 through 19-7-109;

(c) taking, destroying, or possessing wildlife or parts of wildlife for the primary purpose of sale, trade, or other pecuniary gain, in violation of Title 23, Wildlife Resources Code of Utah, or Section 23-20-4;

(d) false claims for medical benefits, kickbacks, and any other act prohibited by Title 26, Chapter 20, Utah False Claims Act, Sections 26-20-1 through 26-20-12;

(e) any act prohibited by the criminal provisions of Title 32B, Chapter 4, Criminal Offenses and Procedure Act;

(f) any act prohibited by the criminal provisions of Title 57, Chapter 11, Utah Uniform Land Sales Practices Act;

(g) any act prohibited by the criminal provisions of Title 58, Chapter 37, Utah Controlled Substances Act, or Title 58, Chapter 37b, Imitation Controlled Substances Act, Title 58, Chapter 37c, Utah Controlled Substance Precursor Act, or Title 58, Chapter 37d, Clandestine Drug Lab Act;

(h) any act prohibited by the criminal provisions of Title 61, Chapter 1, Utah Uniform Securities Act;

(i) any act prohibited by the criminal provisions of Title 63G, Chapter 6a, Utah Procurement Code;

(j) assault or aggravated assault, Sections 76-5-102 and 76-5-103;

(k) a threat of terrorism, Section 76-5-107.3;

(l) criminal homicide, Sections 76-5-201, 76-5-202, and 76-5-203;

(m) kidnapping or aggravated kidnapping, Sections 76-5-301 and 76-5-302;

(n) human trafficking, human smuggling, or aggravated human trafficking, Sections 76-5-308, 76-5-309, and 76-5-310;

(o) sexual exploitation of a minor, Section 76-5b-201;

(p) arson or aggravated arson, Sections 76-6-102 and 76-6-103;

(q) causing a catastrophe, Section 76-6-105;

(r) burglary or aggravated burglary, Sections 76-6-202 and 76-6-203;

(s) burglary of a vehicle, Section 76-6-204;

(t) manufacture or possession of an instrument for burglary or theft, Section 76-6-205;

(u) robbery or aggravated robbery, Sections 76-6-301 and 76-6-302;

(v) theft, Section 76-6-404;

(w) theft by deception, Section 76-6-405;

(x) theft by extortion, Section 76-6-406;

(y) receiving stolen property, Section 76-6-408;

(z) theft of services, Section 76-6-409;

(aa) forgery, Section 76-6-501;

(bb) fraudulent use of a credit card, Sections 76-6-506.2, 76-6-506.3, 76-6-506.5, and 76-6-506.6;

(cc) deceptive business practices, Section 76-6-507;

(dd) bribery or receiving bribe by person in the business of selection, appraisal, or criticism of goods, Section 76-6-508;

(ee) bribery of a labor official, Section 76-6-509;

(ff) defrauding creditors, Section 76-6-511;

(gg) acceptance of deposit by insolvent financial institution, Section 76-6-512;

(hh) unlawful dealing with property by fiduciary, Section 76-6-513;

(ii) bribery or threat to influence contest, Section 76-6-514;

(jj) making a false credit report, Section 76-6-517;

(kk) criminal simulation, Section 76-6-518;

(ll) criminal usury, Section 76-6-520;

(mm) fraudulent insurance act, Section 76-6-521;

(nn) retail theft, Section 76-6-602;

(oo) computer crimes, Section 76-6-703;

(pp) identity fraud, Section 76-6-1102;

(qq) mortgage fraud, Section 76-6-1203;

(rr) sale of a child, Section 76-7-203;

(ss) bribery to influence official or political actions, Section 76-8-103;

(tt) threats to influence official or political action, Section 76-8-104;

(uu) receiving bribe or bribery by public servant, Section 76-8-105;

(vv) receiving bribe or bribery for endorsement of person as public servant, Section 76-8-106;

(ww) official misconduct, Sections 76-8-201 and 76-8-202;

(xx) obstruction of justice, Section 76-8-306;

(yy) acceptance of bribe or bribery to prevent criminal prosecution, Section 76-8-308;

(zz) false or inconsistent material statements, Section 76-8-502;

(aaa) false or inconsistent statements, Section 76-8-503;

(bbb) written false statements, Section 76-8-504;

(ccc) tampering with a witness or soliciting or receiving a bribe, Section 76-8-508;

(ddd) retaliation against a witness, victim, or informant, Section 76-8-508.3;

(eee) extortion or bribery to dismiss criminal proceeding, Section 76-8-509;

(fff) public assistance fraud in violation of Section 76-8-1203, 76-8-1204, or 76-8-1205;

(ggg) unemployment insurance fraud, Section 76-8-1301;

(hhh) intentionally or knowingly causing one animal to fight with another, Subsection 76-9-301(2)(d) or (e), or Section 76-9-301.1;

(iii) possession, use, or removal of explosives, chemical, or incendiary devices or parts, Section 76-10-306;

(jjj) delivery to common carrier, mailing, or placement on premises of an incendiary device, Section 76-10-307;

(kkk) possession of a deadly weapon with intent to assault, Section 76-10-507;

(lll) unlawful marking of pistol or revolver, Section 76-10-521;

(mmm) alteration of number or mark on pistol or revolver, Section 76-10-522;

(nnn) forging or counterfeiting trademarks, trade name, or trade device, Section 76-10-1002;

(ooo) selling goods under counterfeited trademark, trade name, or trade devices, Section 76-10-1003;

(ppp) sales in containers bearing registered trademark of substituted articles, Section 76-10-1004;

(qqq) selling or dealing with article bearing registered trademark or service mark with intent to defraud, Section 76-10-1006;

(rrr) gambling, Section 76-10-1102;

(sss) gambling fraud, Section 76-10-1103;

(ttt) gambling promotion, Section 76-10-1104;

(uuu) possessing a gambling device or record, Section 76-10-1105;

(vvv) confidence game, Section 76-10-1109;

(www) distributing pornographic material, Section 76-10-1204;

(xxx) inducing acceptance of pornographic material, Section 76-10-1205;

(yyy) dealing in harmful material to a minor, Section 76-10-1206;

(zzz) distribution of pornographic films, Section 76-10-1222;

(aaaa) indecent public displays, Section 76-10-1228;

(bbbb) prostitution, Section 76-10-1302;

(cccc) aiding prostitution, Section 76-10-1304;

(dddd) exploiting prostitution, Section 76-10-1305;

(eeee) aggravated exploitation of prostitution, Section 76-10-1306;

(ffff) communications fraud, Section 76-10-1801;

(gggg) any act prohibited by the criminal provisions of Part 19, Money Laundering and Currency Transaction Reporting Act;

(hhhh) vehicle compartment for contraband, Section 76-10-2801;

(iiii) any act prohibited by the criminal provisions of the laws governing taxation in this state; and

(jjjj) any act illegal under the laws of the United States and enumerated in 18 U.S.C. Sec. 1961 (1)(B), (C), and (D).

Utah judge suppresses interviews for prosecutorial misconduct

In the well known case United States v. Claud R. “Rick” Koerber, Utah federal judge Clark Waddoups recently granted the defendant’s motion to suppress statements made in two interviews with the federal government, along with the fruits of those interviews.

Judge Waddoups found a violation of Mr. Koerber’s Due Process rights in “a lead prosecutor’s instructions to federal investigators to initiate pre-indictment ex parte contact with the target of their investigation who prosecutors know is represented by counsel, and to conduct multiple interviews of that person, including through use of questions scripted by the prosecutors and designed to influence the target to waive attorney-client privilege and disclose information about potential trial strategy such as reliance on an ‘advice of counsel’ defense.”

In short: the prosecutors knew that Mr. Koerber was represented by counsel (several counsel, in fact), but still had him interviewed without counsel present, including questioning written by the prosecutor. This was a violation of the Utah Rules of Professional Conduct, which prohibit an attorney from contacting a person known to be represented by counsel. The lengthy ruling is here: https://ecf.utd.uscourts.gov/cgi-bin/show_public_doc?209cr0302-360

This is the second time that federal prosecutors have been found to have engaged in questionable conduct in the Koerber case. Stay tuned…

Not every scheme is a Ponzi scheme (new ruling from Judge Jenkins)

Our office is currently defending several cases in which court-appointed Receivers seek to “claw back” money received by our clients, usually years ago and with no notice that the money allegedly came from a fraudulent scheme.

In nearly all of these cases, the Receiver attempts to lessen (or eliminate) its burden of proof by relying on a so-called “Ponzi presumption.”  Under this presumption, Receivers simply allege that (1) the payor was operating a Ponzi scheme at the time the payment was made; and (2) therefore, every payment made by him was made with an intent to defraud creditors.

Ponzi is the new black.  Receivers (and federal agencies like the SEC) are liberal with the “Ponzi” label.  And, frankly, some of our local courts rarely put Receivers to the test.  Is it really a Ponzi scheme, or is the Receiver just calling it that to make his job easier?

Recently, some creditors of an alleged Ponzi scheme operator challenged the application of a “Ponzi” presumption.  Utah federal Judge Bruce Jenkins issued a lengthy opinion, which contains a long discussion of the history of Ponzi schemes and the definition of Ponzi scheme used by each federal circuit.  He concluded that, if the Receiver wanted to claw back funds from these creditors, it would need to prove its case; it couldn’t simply say “Ponzi scheme!” and avoid proving it in the 40 clawback cases it is bringing.

The ruling in SEC v. Management Solutions, Inc., is very interesting:  https://ecf.utd.uscourts.gov/cgi-bin/show_public_doc?211cv1165-1215.

 

 

Large arbitration award in UPUAA case

Last week, a three-arbitrator panel in Salt Lake City entered a final award of more than $800,000 in damages, attorney fees, and costs against a defendant in a civil Utah Pattern of Unlawful Activity Act claim.  The defendant was found to have committed a pattern of Communications Fraud.

The plaintiff was represented by this law firm (Christensen & Jensen).  Once the arbitration awards are confirmed in court, more details about the claim will be posted.