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.

Update: All Charges Dismissed Against Former Provo Councilman Steven Turley

In February of this year, the last of ten felony charges against former Provo council member Steven Turley was dismissed.

Steve Turley Charges DroppedIn February of this year, the last of ten felony charges against former Provo council member Steven Turley was dismissed. Previously, we wrote about the dismissal of three counts of communications fraud in Mr. Turley’s case in 2013. Through the entire judicial process Mr. Turley has always maintained his innocence, claiming, “I did nothing wrong. I went about regular business.” According to Turley, the charges against him were motivated by “political enemies,” and an overzealous Utah County Attorney’s Office.   “They tried to create victims,” he said. “As we go through this list of alleged victims, they have voluntarily provided statements, such as, ‘We were never defrauded.'”

In 2011, around the same time Turley was charged criminally, Provo city mayor released a separate civil ethics investigation report, which found that Turley had violated the Municipal Officers’ and Employees’ Ethics Act, and as a result he should be dismissed from the council. The report’s author, retired 4th District Judge Anthony Schofield, admitted in his report that he was under time constraints and that he could only find five instances where he found Turley violated the ethics code. Even still, Schofield’s investigation found that Turley failed to disclose ownership in property that the council was taking action on. Schofield also reported that Turley also failed to disclose his interest in swapping U.S. Forest Service land for property in Rock Canyon. Turley was “disappointed” by Schofield’s report and said that he believed Schofield was not given enough time to look into the accusations or Turley’s response.

Even in light of Schofield’s report and the laundry list of charges against him, Turley pressed on, eventually winning dismissal of all charges against him. However, he has paid a heavy price in his fight to vindicate his himself. Provo mayor John Curtis, who once spearheaded the movement calling for Turley’s resignation, has said that the former councilman has paid a heavy price and deserves a fresh start. “For a lot of people, they’re happy to have this over. I’m very pleased for Steve. I’m very pleased for his family.” When asked if he might ever return to politics, Turley said he would continue “to serve the community,” but it might be by taking his kids for a walk, and not through politics. “Quite frankly, it has devastated our family,” and “it’s a shame that we had to go through that.”

Mr. Turley’s case provides a cautionary tale for politicians engaging in real estate transactions or other business dealings. Ultimately Mr. Turley’s conduct even if not illegal or unethical drew the ire of his fellow politicians and result in the demise of his political career. It was only after approximately four years in the judicial system that Mr. Turley has been able to vindicate himself, even though the time has taken its toll on Mr. Turley and his family.

Ex-Attorney General Mark Shurtleff Eagerly Awaits Preliminary Hearing

n July 2014, both Swallow and Shurtleff were arrested on various charges including bribery, accepting gifts, tampering with witnesses and evidence, and engaging in a pattern of unlawful conduct.

John Swallow and Mark Shurtleff TrialsUnless you’ve been living on the moon for the year or so you have undoubtedly heard about the arrests of John Swallow and Mark Shurtleff. In July 2014, both Swallow and Shurtleff were arrested on various charges including bribery, accepting gifts, tampering with witnesses and evidence, and engaging in a pattern of unlawful conduct. In all, Swallow, who was forced from office less than a year into his first term as Attorney General, was charged with eleven felonies and two misdemeanors, including multiple counts of receiving or soliciting bribes, accepting gifts, tampering with evidence, obstructing justice and participating in a pattern of unlawful conduct. As for his compatriot Shurtleff, who served as Attorney General for twelve years before Swallow took office, he was charged with ten felonies, including receiving or soliciting bribes, accepting gifts, tampering with witnesses and evidence, and participating in a pattern of unlawful conduct.

Swallow’s preliminary hearing has been set for June 8, 2015, and Shurtleff’s is set for one week later on June 15th. According to a recent news report, Shurtleff is anxious for his day in court. “It’s time to get this evidence before a judge and we’re very excited it’s going to happen in June. I look forward to telling the rest of the story that y’all haven’t heard yet,” Shurtleff told reporters after appearing in 3rd District Court recently. According to Shurtleff’s lawyer, “It will be a year in June. His name has been vilified in the press and he wants the opportunity to hear what the state claims it has, what it thinks it can prove and really start the process now of clearing his name.”

To date, no plea offers have been made to either Swallow or Shurtleff, and that’s just fine by Shurtleff and his lawyer. “And I think that with my client that would probably be a waste of time,” Shurtleff’s lawyer said. “You can say that again,” said Shurtleff, as he stood next to his lawyer.

A pre-trial hearing is scheduled for May 22. As for the looming preliminary hearing, Shurtleff’s lawyer says, “I really don’t know what the state is planning to do .. I don’t know what the criminal information will look like. I don’t know what evidence they think they have. … I really don’t know what the case will look like at that point.” Following the preliminary hearings we will know more about the potential fates of Swallow and Shurtleff, but for now we will have to wait until June. Stay tuned.

Utah Passes White Collar Crime Registry Bill in a Flurry

Sean Reyes White Collar Crime RegistryWith only two days left in the 2015 legislative session, Utah lawmakers made history by passing the first white-collar crime registry bill in the United States. The Utah Senate unanimously voted to pass HB378, White Collar Crime Registry, with no debate. The Senate hastily pushed the bill through for final passage even though it had not undergone a second and third reading. The bill has now gone to Gov. Gary Herbert for his consideration. The bill was sponsored by Rep. Mike K. McKeil and Sen. Curtis S. Bramble.

However, the bill has long been the brainchild of Utah Attorney General Sean Reyes. In a recent news release regarding the bill’s introduction, Reyes said:

Utah’s unique personal interweavings and close relationships offer a rich environment for predatory behavior and financial crimes in our state. We trust those in our neighborhoods, in our churches, in our social circles and in our professions … This registry will make already public information much more accessible for the average citizen in this digital age.  It will inform anyone performing a simple name search if they are investing with someone who has previously been convicted of financial crimes …  And this tool will hopefully curtail some of the billions of dollars lost in Utah to investment fraud and other financial crimes.  This will be a tremendous outcome for citizens if passed.

But while the registry may make it easier for citizens of Utah to protect themselves against affinity fraud and other white-collar crimes, what does it mean for those who are facing and/or have been convicted of white-collar criminal charges?

The bill gives the AG’s Office the sole authority over the Utah White Collar Crime Offender Registry. It provides how the AG’s office is to disseminate information from the website to the public. It lists the criminal offenses for which a person must register, which include offenses specified in the UPUAA. However it also provides for a registration exception for persons convicted after December 31, 2005. Furthermore, the bill allows registered persons to petition to have his or her name removed from the Utah White Collar Crime Offender Registry.

Within 45 days of a conviction, any attorney general, county attorney, or district attorney is to inform the AG’s office of the conviction along with providing the crimes for which the offender has been convicted, a description of the offender’s targets, and any other info the AG’s office determines relevant. The AG’s office inputs the offender information into the Utah White Collar Crime Registry website, which is then disseminated to the public. The website provides to the public: 1) all names and aliases of the offender; 2) a physical description of the offender, including date of birth, height, weight, and eye and hair color; 3) a recent photo of the offender; and 4) the relevant white-collar crimes the offender has been convicted of.

A first time offender listed on the registry shall remain on the registry for ten years. A second time offender shall remain on the list for an additional ten-year period. And a third time offender will remain on the registry for a lifetime period. However, an offender who has been convicted of a relevant offense after December 31, 2005 is not required to register so long as they have complied with all court order orders, paid all fines and restitution, and not been convicted of any other crimes.

Finally, the bill provides for a mechanism by which an offender may petition to be removed from the Utah White Collar Crime Offender Registry after five years so long as the offender has completed all treatments ordered by the court or Board of Pardons, the offender has not been convicted of any other crimes, excluding traffic offenses, the offender has paid all restitution ordered by the court, notice has been given to all the victims and the prosecutor, and the offender has not been found to be civilly liable for which fraud, misrepresentation, deceit, breach of fiduciary duty, or the misuse or misappropriation of funds is an element. Within 30 days of receiving the petition, the prosecutor shall provide to the court a presentence report, any evaluation done as part of sentencing, and any other information the prosecutor deems relevant. The victim(s) may respond to the petition by filing a recommendation or an objection within 45 days after the mailing of the petition to the victim. The court then reviews the petition and all submitted documents and holds a hearing if requested by the prosecutor or the victim. Then, “[i]f the he court determines that it is not contrary to the interests of the public to do so, the court may grant the petition and order removal of the offender from the registry.”

While the bill passed unanimously with no debate, is such a registry the solution to deter future financial crimes? At least one Utah lawmaker isn’t ready to go so far as branding these white-collar criminals. Utah Representative Fred C. Cox is concerned about the stigma that such a branding would create. He said in a speech from the State House floor that “these are important crimes that we want to protect individuals against, but I’m not ready for a scarlet A, or whatever letter would be involved.” The comments of Rep. Cox raise the question of whether the registry is really about protecting the citizens of Utah, or if it is more about “shaming” those convicted of white-collar offenses. It remains to be seen if Gov. Herbert will sign the bill into law, and if so, time will only tell if the registry is really a resource to protect Utah citizens against white-collar crime. Those recently convicted of white-collar crimes will undoubtedly be watching the Governor’s office very intently in the following weeks to see whether they will be required to register with the State’s database.

UPUAA civil claims: Who is a “high managerial agent” for double damages?

Under the Utah Pattern of Unlawful Activity Act, a plaintiff seeking double damages in a civil case must show that the misconduct was, at a minimum, recklessly tolerated by a “high managerial agent” of the defendant.  The UPUAA does not define “high managerial agent,” so what does it mean under state law?

Utah’s criminal code does contain a definition of “high managerial agent,” similar to the definition in the Model Penal Code.  An argument could be made that the standard for high managerial agent required for criminal responsibility is, or should be, higher than that for civil liability.  But for discussion purposes, Utah Code Ann. § 76-2-204(2), “high managerial agent” in a criminal case means:

(a)        A partner in a partnership;

(b)        An officer of a corporation or association; [or]

(c)        An agent of a corporation or association who has duties of such responsibility that his conduct reasonably may be assumed to represent the policy of the corporation or association.

The first two categories are usually easy to apply.  It is the third category that is fodder for litigation.  One relatively recent opinion by the Missouri Court of Appeals is illustrative.  Like Utah, Missouri requires the involvement or toleration of a “high managerial agent” in order to impose criminal liability.  Under Missouri’s statute, a high managerial agent is “an officer of a corporation or any other agent in a position of comparable authority with respect to the formulation of corporate policy or the supervision in a managerial capacity of subordinate employees,” Mo. Rev. Stat. § 562.056.3(2).

In State v. Community Alternatives Missouri, Inc., 267 S.W.3d 735 (Mo. Ct. App. 2008), a corporation was criminally prosecuted for neglect of residents in one of 30 nursing homes operated by the defendant.  It was alleged that a woman named Mary Collura had engaged in and knowingly tolerated the conduct in question.  Collura was the “lead staff person for two of the group homes,” a management position that included management of residents’ care, evaluation and discipline of employees, and the authority to write checks on behalf of residents and take residents to the doctor.  Id. at 737.

The defendant argued that Collura did not qualify as a high managerial agent because, regardless of her authority at the individual group home, she did not have authority to make company-wide policy:

Defendant’s argument regarding whether Mary Collura was a high managerial agent and whether the actions she took, or failed to take, occurred on behalf of defendant within the scope of her employment is directed to Ms. Collura’s status in defendant’s overall corporate structure.  Defendant contends it cannot be held liable because Mary Collura lacked corporate-wide authority and lacked authority comparable to a corporate officer within that structure.  [Id. at 744.]

The Missouri Court of Appeals rejected that argument.  Explaining that “[i]t is the function within a corporate structure that must be considered, not merely job titles,” id. at 745, the court found that Ms. Collura qualified as a “high managerial agent” based on her supervisory duties at the home, authority over local expenditures and communication with patients’ doctors, and the limited oversight of company officers.  See id. at 744-46.  Regarding the scope of her authority, the court held that a corporation could not avoid criminal liability for what occurred at one of its units merely because it operated multiple units:

A question this appeal presents is whether the definition of “high managerial agent” is to be applied differently with respect to corporations that operate numerous business units than to corporations that operate a single business unit.  Is a corporation that operates numerous business units shielded from criminal liability when the same conduct would subject a corporation with a single business unit to criminal liability?  This court thinks not.  [Id. at 745]

Collura’s authority at the group home was such that, if the home had been a single unit, the defendant could not have denied her status as a high managerial agent, the court noted.  Id.  Accordingly, it would not make sense to allow the same defendant to deny her status just because it owned more than one unit:

In this case, defendant operated many facilities, or business units, under a single corporate ownership.  Each business unit had personnel responsibility for the care of the residents at its facility.  This court does not perceive the legislative intent that fostered enactment of [the high managerial agent requirement] to have been to treat large corporations with numerous operating units different from those that operate a single or a few business units.

See also People v. Lanzo Construction Co., 726 N.W.2d 746 (Mich. Ct. App. 2006) (crew chief in charge of safety on job site qualified as a “high management official” under similar criminal responsibility standard); People v. Mejia Real Estate, Inc., 672 N.Y.S.2d 645, 647-48 (N.Y. Sup. Ct. 1998) (jury could find that real estate agent was high managerial agent under similar corporate liability provision).

Can a vindicated criminal defendant recover expenses under the UPUAA?

The Utah Pattern of Unlawful Activity Act has both criminal and civil components.  In a criminal case, the government is allowed to tack on “the costs of investigating and prosecuting the offense” if the prosecution is successful.  Utah Code Ann. Section 76-10-1603.5 says:

(1)  A person who violates any provision of Section 76-10-1603 [UPUAA] is guilty of a second degree felony.  In addition to penalties prescribed by law, the court may order the person found guilty of the felony to pay to the state, if the attorney general brought the action, or to the county, if the county attorney or district attorney brought the action, the costs of investigating and prosecuting the offense and the costs of securing the forfeitures provided for in this section.

But what if the defendant is acquitted?  Can the defendant get from the government his own “costs of investigating and [defending] the offense”?

Probably not, unless you’re in federal court.  (The federal Hyde Amendment allows a vindicated criminal defendant to recover fees if the prosecution was groundless and in bad faith, vexatious, etc.)  Utah does have a “reciprocal attorney fee” statute, but it is limited to civil cases, and only applies when a contract claims to allow just one of the parties to the contract to recover attorney fees:

A court may award costs and attorney fees to either party that prevails in a civil action based upon any promissory note, written contract, or other writing executed after April 28, 1986, when the provisions of the promissory note, written contract, or other writing allow at least one party to recover attorney fees.  (Utah Code Ann. Section 78B-5-826.)

UPUAA civil claims – is knowledge by a “high managerial agent” required?

In some ways, the Utah Pattern of Unlawful Activity Act is the same for criminal cases as in civil cases.  In other ways, the two are very different.

In a recent case we brought under the UPUAA, the defendant corporation argued that, even though it was a civil case, our clients were still required to establish certain elements of criminal responsibility from the Criminal Code.  In particular, the corporation argued that it could not be found liable in a UPUAA civil case unless a “high managerial agent” (not just an employee or lower-level agent) had knowledge of or tolerated the misconduct.

The corporation’s argument went like this:  If this were a criminal case, knowledge or participation by a high managerial agent would be required to get a conviction.  In a civil UPUAA case, a plaintiff has to prove the elements of one or more underlying criminal offenses (called “predicate” offenses.  For example, a common predicate offense in an UPUAA claim is Communications Fraud.)  Because the plaintiff has to show the elements of an underlying criminal offense, then the plaintiff should also have to show other requirements for a criminal conviction, such as the “high managerial agent” requirement.

The corporation’s argument was fairly easy to rebut.  First, it was contradicted by the Criminal Code itself, which expressly says that its provisions do not apply to civil claims.  In the introductory provisions of the Criminal Code, Utah Code Ann. § 76-1-107(3) states:

This act does not bar, suspend, or otherwise affect any right or liability to damages, penalty, forfeiture, impeachment, or other remedy authorized by law to be recovered or enforced in a civil action, administrative proceeding, or otherwise, regardless of whether the conduct involved in the proceeding constitutes an offense defined in this code.

The corporation’s argument had other problems as well.  For example, the statute upon which it relied, Utah Code Ann. § 76-2-204(2), applies only in prosecutions in which a defendant is subject to criminal sentencing.  The section addresses “criminal responsibility of corporation[s],” and says that “A corporation or association is guilty of an offense” when it has been recklessly tolerated, etc., by a high managerial agent.  Being found “guilty of an offense” triggers criminal sentencing.  Utah Code Ann. § 76-3-101(1) (“A person adjudged guilty of an offense under this code shall be sentenced in accordance with the provisions of this chapter”) (emphases added).  No criminal sentencing is at issue in a civil case.

An additional flaw in the corporation’s argument was that it disregarded the Criminal Code’s recognition that, even in criminal prosecutions, its general provisions do not apply if a different requirement is specified in a particular statute.  See Utah Code Ann. § 76-1-103(1) (“The provisions of this code shall govern the construction of, the punishment for, and defenses against any offenses defined in this code or, except where otherwise specifically provided or in the context otherwise requires, any offenses defined outside this code”).  (This, of course, is nothing more than a recognition of the settled proposition that, a more specific statutory provision always takes precedence over a more general statutory provision.  Taghipour v. Jerez, 2001 UT App 139, ¶ 10, 26 P.3d 885.)

Utah Code Annotated § 76-2-204(2)  says that, in criminal cases,

“A corporation or association is guilty of an offense when: . . . (2) The conduct constituting the offense is authorized, solicited, requested, commanded, or undertaken, performed, or recklessly tolerated by the board of directors or by a high managerial agent acting within the scope of his employment and in behalf of the corporation or association.”

Compare that to Utah Code Annotated § 76-10-1605(4), which says that, in civil cases under the Utah Pattern of Unlawful Activity Act, such a showing is required only if the plaintiff is seeking double damages:

“In all actions under this section, a principal is liable for actual damages for harm caused by an agent acting within the scope of either his employment or apparent authority.  A principal is liable for double damages only if the pattern of unlawful activity alleged and proven as part of the cause of action was authorized, solicited, requested, commanded, undertaken, performed, or recklessly tolerated by the board of directors or a high managerial agent acting within the scope of his employment.”

Under the plain wording of the UPUAA, therefore, all that claimants in a civil action need show to recover actual (single) damages is that the harm was caused by an agent acting within the scope of his employment or agency.             Interpreting the UPUAA as requiring a high managerial agent to have been involved in the unlawful activity for any damages award would render the first sentence of Subsection 76-10-1605(4) meaningless.  See also Williams General Corp. v. Stone, 632 S.E.2d 376 (Ga. 2006) (rejecting similar argument by the defendant in a civil case).

Finally, our interpretation was supported by legislative history.  When introducing a bill on the state senate floor amending UPUAA’s precursor (the Utah Racketeering Influenced and Criminal Enterprises Act), Senator David Schwendiman expressly noted this graduated corporate liability standard:

Insofar as corporations are concerned, if a corporation is involved, that corporation is not liable for double damages unless it can be proven that one of the high managerial agents or one of the partners or whomever actually sought to have the criminal conduct committed, or authorized it, or knew about it and condoned it.  Under the ordinary circumstances there would be actual damages available to a plaintiff when a corporation is involved in this type of conduct but there is no managerial agent who has sought to have a crime committed.

Sub. S.B. 145, 47th Leg., Morning Sess. (Feb. 20, 1987) (statement of Sen. Schwendiman).

There are some legal issues under the Utah Pattern of Unlawful Activity Act that could be close calls – this is not one of them.  A plaintiff in a civil case does not have to show knowledge or participation by a “high managerial agent” unless the plaintiff is seeking double damages.

If you come across interesting developments or issues involving the Utah Pattern of Unlawful Activity Act, feel free to e-mail us confidentially,