Vol. 42, No. 12
From the Courts
U.S. Court of Appeals for the Tenth Circuit
Summaries of Selected Opinions
Summaries of selected Tenth Circuit Court of Appeals Opinions appear on a space-available basis. The summaries are prepared for the Colorado Bar Association (CBA) by Katherine Campbell and Frank Gibbard, licensed Colorado attorneys. They are provided as a service by the CBA and are not the official language of this Court. The CBA cannot guarantee the accuracy or completeness of the summaries. Full copies of the Tenth Circuit decisions are accessible from the CBA website: www.cobar.org (click on "Opinions/Rules/Statutes").
No. 12-3238. United States v. Alvarez. 10/01/2013. D.Kan. Judge Ebel. Sentencing Guidelines—Acceptance of Responsibility Reduction—Decision to Go to Trial—Factual vs. Legal Challenge.
Defendant was charged with two crimes: possession with intent to distribute methamphetamine and conspiracy to distribute methamphetamine. He pleaded guilty to the possession count and pleaded not guilty to the conspiracy count. He went to trial on the conspiracy count and was convicted. On appeal, defendant argued that the district court erred at sentencing by denying him an offense-level reduction for acceptance of responsibility under § 3E1.1 of the Sentencing Guidelines.
The Tenth Circuit found no error in the district court’s denial of an acceptance-of-responsibility reduction. Even if the court erroneously concluded that such a reduction is never available when a defendant goes to trial, such an error in this case would have been harmless. Defendant never admitted the fact of conspiratorial agreement, which is essential to the offense charged. Instead, he put the government to its burden of proof on that factual element of guilt at trial. Thus, defendant did not fall within the "rare situation" that occurs when a defendant admits to the criminal conduct for which he has been accused, but goes to trial to raise a legal or constitutional issue involving the alleged crime. The Circuit therefore affirmed defendant’s sentence.
No. 11-4182. Securities and Exchange Comm’n v. Thompson. 10/04/2013. D.Utah. Judge Ebel. Securities—Ponzi Scheme—Notes—Civil Enforcement—Criteria to Identify "Security."
The Securities and Exchange Commission (SEC) brought a civil enforcement action against defendant based on a Ponzi scheme he ran through his company, Novus. Defendant needed to raise a large amount of cash to take advantage of some potentially lucrative business opportunities. After obtaining a legitimate small business loan of $360,000, defendant, through Novus, invested this sum in schemes (later exposed as Ponzi schemes) promising monthly returns of 5% to 40%. Novus then sought investors by offering a loan instrument (instrument) so he could invest the loaned money in the Ponzi schemes. As the Novus business grew, defendant offered existing instrument holders referral fees and advertized the instrument as a low-risk investment. The district court granted summary judgment in favor of the SEC, holding that the financial instruments Novus sold to investors were "securities," as defined by the relevant securities statutes. Defendant appealed.
The Tenth Circuit determined that the instruments were securities as a matter of law. A "security" is broadly defined. A financial instrument’s status is determined by considering the economics of the transaction. Short-term notes issued in a commercial or consumer context are not securities. Although the instruments issued by Novus were similar to non-security notes in some respects, the Circuit held that under the U.S. Supreme Court’s family resemblance test, the instruments were securities. The test considers (1) the motivation of the buyer and seller of the instruments; (2) the plan for distributing the instruments; (3) the reasonable perceptions of the investing public; and (4) whether some factor, such as another regulatory scheme, significantly reduced the risk of the instrument or whether there was collateral backing the notes. The district court’s judgment was affirmed.
Nos. 12-3302 & 12-3332. Landrith v. Schmidt. 10/15/2013. D.Kan. Per Curiam. Appellate Court Filing Restrictions—Abusive Litigant—Disbarred Lawyer—Conditions for Filing Appeals.
The Tenth Circuit imposed filing restrictions on a pro se litigant who is a disbarred Kansas lawyer. The Circuit first noted that the Kansas Supreme Court had found the litigant incompetent to practice law. The litigant’s history of litigation in the appellate court was rife with attacks on state court judges and officials, as well as federal district court judges. He also filed numerous appeals with fundamental legal flaws. The Circuit thus concluded that he had strained the court’s resources with frivolous and abusive pro se filings. Consequently, after giving him an opportunity to file objections, the Circuit exercised its inherent power to regulate the activities of abusive litigants by imposing carefully tailored filing restrictions. The litigant was restricted from filing future appeals in the Circuit unless he is represented by counsel or obtains permission from the chief judge to proceed pro se.
Nos. 12-6034 & 12-6035. United States v. Rufai. 10/15/2013. W.D.Okla. Judge Matheson; United States v. Adegboye. 10/15/2013. W.D.Okla. Judge Ebel. 10/15/2013. W.D.Okla. Judge Ebel. Consolidated Summaries of Separate Appeals—Sufficiency of the Evidence—Aiding and Abetting—Willful Participation in Healthcare Fraud Scheme.
A jury convicted each of the defendants of five counts of aiding and abetting healthcare fraud. In separate appeals, each challenged the sufficiency of the evidence to show that he knowingly and willfully aided the fraudulent healthcare scheme. In Rufai’s case, the Tenth Circuit reversed his convictions. In Adegboye’s case, the Circuit affirmed.
An unindicted third party, Ohaka, had agreed with defendants to form a business, First Century Medical Supply (First Century). Rufai incorporated First Century, helped open a bank account for the company, and acted as its vice president. Adegboye served as First Century’s president, wrote checks to pay the company’s bills, and applied for First Century to become a Medicare durable medical equipment provider. Additionally, in the application, Adegboye misleadingly asserted that he alone owned and operated First Century. Ohaka then used First Century’s Medicare billing number to submit fraudulent Medicare claims. After First Century came under investigation, Adegboye failed to disclose Ohaka’s role in operating First Century.
In Rufai’s case, the Circuit held that the evidence was insufficient to establish his knowledge of and willful participation in the scheme. Neither Rufai’s history of business relationships with Ohaka, the assistance he provided in setting up First Century as a straw owner operation, or his knowledge that some customers had not received the medical equipment for which Medicare was billed was sufficient, either separately or taken together, to prove the mens rea (guilty knowledge) element of the crime. Exercising plain error review, the Circuit therefore reversed Rufai’s convictions for healthcare fraud.
In Adegboye’s case, the Circuit found there was sufficient evidence that he knew the specifics of Ohaka’s healthcare fraud. Taken together, his misrepresentations about Ohaka’s ownership to the authorities, the fact that he remained involved with the company’s operation throughout its existence and controlled its bank accounts, his knowledge of customer complaints, the evidence of his efforts to cover up the company’s fraudulent actions, and evidence that he profited from the fraud were sufficient to establish his guilty knowledge of the scheme.
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