Business Crimes Hotline

CONNECTICUT

Pollster Guilty of Falsifying Polls and Surveys

The owner and operator of a Connecticut polling and survey company pleaded guilty to wire fraud related to a scheme to falsify polling results, according to the U.S. Attorney's office. The pollster admitted to falsifying polling results in order to meet deadlines or to satisfy other customer requirements that the company could not meet. Falsifications reportedly ranged from changing the demographic information associated with the data collected, such as gender or political affiliation, to fabricating surveys in their entirety. (United States v. Costin, No. 05-00038, D. Conn.)

MICHIGAN

First Spammer Sentenced Under Federal 'CAN-SPAM' Law

A Michigan man who was the first person charged under 'CAN-SPAM,' 15 U.S.C. ' 7701 et seq., the federal law making certain kinds of fraudulent or unauthorized mass electronic mailings federal crimes, was sentenced to 3 years in prison, according to the U.S. Attorney for the Eastern District of Michigan. The defendant reportedly developed a business to market and sell diet aids and prescription medications through the use of 'spam' bulk commercial e-mail. The scheme made over $350,000 in a 4-month period before the defendant was arrested in early 2004. (United States v. Lin, No. 04-80863, E.D. Mich.)

NEW JERSEY

Former Company President Guilty of Conspiracy and Money Laundering

The former president of a publicly traded vertical marketing company pleaded guilty to one count of conspiracy to commit securities and wire fraud and to one count of money laundering, according to the U.S. Attorney's office. He admitted to fraudulently issuing company stock to individuals the company characterized as 'consultants' when in fact the stock was issued to settle other debts, such as paying for marketing services or other business expenses. The company did this in order to take advantage of an SEC rule allowing the company to issue free-trading stock to individuals performing legitimate advisory services at a time when the company's stock would have otherwise been restricted. The defendant also admitted to laundering the proceeds of a separate fraud scheme by washing the funds through a bank account opened in the name of a nonexistent company. (United States v. Sgarlat, No. 06-00723, D.N.J.)

Business Crimes Bulletin and In the Courts were written by Thomas M. Craig, an Associate at Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

CALIFORNIA

Software Executive Guilty of Obstructing SEC Investigation

The defendant, the former owner of one California software company as well as a former employee of a second, pleaded guilty to obstructing an SEC investigation into transactions between the companies, according to the DOJ. The defendant reportedly admitted that on two occasions he falsely testified before the SEC when he asserted that he did know about 'finder's fees' paid from one company to the other and also when he questioned the authenticity of his own signature on certain documents. According to prosecutors, the finder's fees were actually payments made in exchange for the defendant's signatures on bogus documents. The defendant also admitted that he knew that some of the contracts involved in the scheme were backdated to make it appear that the deals had been concluded in prior fiscal quarters. (United States v. Whitt, No. 04-2605-11, S.D. Ca.)

CONNECTICUT

Pollster Guilty of Falsifying Polls and Surveys

The owner and operator of a Connecticut polling and survey company pleaded guilty to wire fraud related to a scheme to falsify polling results, according to the U.S. Attorney's office. The pollster admitted to falsifying polling results in order to meet deadlines or to satisfy other customer requirements that the company could not meet. Falsifications reportedly ranged from changing the demographic information associated with the data collected, such as gender or political affiliation, to fabricating surveys in their entirety. (United States v. Costin, No. 05-00038, D. Conn.)

MICHIGAN

First Spammer Sentenced Under Federal 'CAN-SPAM' Law

A Michigan man who was the first person charged under 'CAN-SPAM,' 15 U.S.C. ' 7701 et seq., the federal law making certain kinds of fraudulent or unauthorized mass electronic mailings federal crimes, was sentenced to 3 years in prison, according to the U.S. Attorney for the Eastern District of Michigan. The defendant reportedly developed a business to market and sell diet aids and prescription medications through the use of 'spam' bulk commercial e-mail. The scheme made over $350,000 in a 4-month period before the defendant was arrested in early 2004. (United States v. Lin, No. 04-80863, E.D. Mich.)

NEW JERSEY

Former Company President Guilty of Conspiracy and Money Laundering

The former president of a publicly traded vertical marketing company pleaded guilty to one count of conspiracy to commit securities and wire fraud and to one count of money laundering, according to the U.S. Attorney's office. He admitted to fraudulently issuing company stock to individuals the company characterized as 'consultants' when in fact the stock was issued to settle other debts, such as paying for marketing services or other business expenses. The company did this in order to take advantage of an SEC rule allowing the company to issue free-trading stock to individuals performing legitimate advisory services at a time when the company's stock would have otherwise been restricted. The defendant also admitted to laundering the proceeds of a separate fraud scheme by washing the funds through a bank account opened in the name of a nonexistent company. (United States v. Sgarlat, No. 06-00723, D.N.J.)

Business Crimes Bulletin and In the Courts were written by Thomas M. Craig, an Associate at Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.