The Wrap: Recent White Collar Matters In The News

Posted On Wednesday, February 12, 2014

MF Global Customer Claims Survive Motion to Dismiss

Tuesday, Reuters’ Nate Raymond reported that the motion to dismiss by former MF Global CEO Jon Corzine and other MF Global Executives was denied by U.S. District Judge Victor Marrero (S.D. N.Y). The judge noted that it was reasonable to infer that someone “did something wrong to set in motion such an extraordinary chain of events causing such extensive harm to so many people and interests.” Raymond reported that Marerro was also critical of the customer claimants, calling the litigation over MF Global’s $1.6 billion failure “wasteful and rancorous.”

Indictment in Wire Fraud Kick-Back Scheme, District of Maryland

On Monday, DOJ announced the indictment of Asem Elgawhary, the former principal vice president of Bechtel Corporation and general manager of the Power Generation Engineering and Services Company (PGESCo). Elgawhary was indicted on mail fraud, wire fraud, money laundering and tax fraud charges, for allegedly taking millions of dollars in kickbacks from power companies in exchange for preferential treatment. The government also alleges that Elgawhary concealed his kickback scheme through the use of off-shore bank accounts, giving false information to his employer and destroying evidence. 

Guilty Plea in Municipal Bond Bid Rigging Scheme, Western District of North Carolina

On Monday, DOJ announced the guilty plea of former Bank of America executive Phillip Murphy to charges of wire fraud and conspiracy in the U.S. District Court for the Western District of North Carolina in a scheme relating to bidding for contracts of the investment of municipal bond proceeds and another municipal finance contracts. According to DOJ, Murphy and his co-conspirators misrepresented to municipal issuers that the bidding process was competitive and in compliance with U.S. Treasury regulations, causing the municipal issuers to award investment agreements and other municipal finance contracts to providers that otherwise would not have been awarded the contracts. 

$17 Million Order of Disgorgement for SEC Affirmed, Third Circuit

On Monday, the Third Circuit (Circuit Judge Nygaard writing for the Court) affirmed the SEC’s civil judgment in the Middle District of Pa. against businessman Alfred Teo and MAAA Trust, in SEC v. Alfred S. Teo, Sr., No. 12-1168 (3d Cir. February 10, 2014). The defendants were found to have committed securities fraud relating to transactions and disclosures regarding their holdings in Musicland, a Delaware Corporation. As a result of the judgment issued after a jury trial, the defendants had been ordered to pay $17 million in disgorgement and $14 million in prejudgment interest. Teo and MAAA Trust had argued errors arising from the admission of certain evidence and the use of a general verdict form, as well as the disgorgement and prejudgment interest awards. Among the evidentiary decisions affirmed by the Court was the district court’s admitting evidence of Teo’s prior conviction for insider trading, including the guilty plea allocution, arising out of the acquisition of Musicland by Best Buy in 2000.