The National Attorneys General Training & Research Institute
CEPI Newsletter June 2020
This monthly compendium of news reports about corruption and ethics issues is brought to you by the Center for Ethics and Public Integrity (CEPI). Neither the National Association of Attorneys General nor the National Attorneys General Training & Research Institute express a view as to the accuracy of news accounts or affirm any position taken by the authors of the hyperlinked articles.
Ohio Attorney General Serves Search Warrant on Worthington Assisted Living Center After COVID-19 Related Complaints: The Ohio Attorney General’s Office has executed a search warrant at the Bickford Senior Living Center to investigate COVID-19-related complaints. Former staff of the assisted living center allege that leadership improperly downplayed the risk of COVID-19 even as the virus was spreading through the facility, neglected to test patients to avoid having to report confirmed COVID-19 cases, and did not separate COVID-19-positive patients or provide proper personal protective equipment to patients or staff.
Washington State Claws Back $300 Million From Unemployment Fraud Scheme as 323,000 Jobless Workers Await Benefits: A week after acknowledging that fraudsters stole hundreds of millions of dollars in unemployment benefits, Washington state has recovered more than $300 million and blocked additional thefts. Officials note that their efforts may result in further delays of benefits to workers who have filed legitimate claims. The scheme is allegedly orchestrated by a Nigerian criminal group called “Scattered Canary,” which used stolen personal data to file false claims for benefits.
Price Gouging & Similar Scams
Georgia Man Tried to Sell $317M Worth of Masks — Except, They Didn’t Exist, Feds Say: Charges alleging a scheme to sell 50 million nonexistent N95 face masks to a foreign government have been filed against Georgia resident Paul Penn, whose company, Spectrum Global Holdings, LLC, was the “middle man” on the deal. The U.S. Secret Service contacted the foreign government to warn it just as it was about to wire over $300 million to Penn.
Used Car Dealer Charged with Price Gouging New York City On 3M's N95 Masks: A New Jersey used car dealer was charged by federal prosecutors in Manhattan with attempting to price gouge New York City on 7 million 3M-branded N95 masks. Ronald Romano, who owned Performance Supply LLC, tried to sell the masks for $45 million—about 500% over the typical list price. He also forged a letter that purported to show that 3M authorized the sale. He is accused of a similar scheme to sell N99 masks to Florida’s Division of Emergency Management at about 500% over list. Even after being warned the FBI might investigate suspected price gouging, Romano persisted. 3M has filed civil suits against Romano’s company and about at least 10 others engaging in similar practices.
Feds Arrest 'The Mask Man,' New York Pharmacist Accused of Profiteering on N95 Masks: New York pharmacist Richard Schirripa, a/k/a “The Mask Man,” has been charged with buying about $200,000 worth of N95 masks and selling them at extremely inflated prices. Shirripa, who often sold the masks out of his car, also faces unrelated charges related to lies he told the DEA about the disposition of opioids when he closed his pharmacy, and healthcare and identity fraud for lying to Medicare and Medicaid about opioid prescriptions.
Queens Man Claiming to Be Trump Official Charged with Running Coronavirus Test Scam: Henry Sylvain Gindt II, who promised at-home testing kits to diagnose COVID-19, has been charged with mail and wire fraud. Gindt controlled www.YouHealth.me and youhealth.shop—where he sold the kits, which he obtained from a rogue lab employee. While it appears that Gindt did send kits to at least some people who paid the $175 he was charging, no one who sent in a kit received any results.
Paycheck Protection Program
Inside the First Paycheck Protection Program Fraud Charges: Law360 summarizes three early federal cases brought alleging schemes to defraud the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security, or CARES, Act. The article details investigative techniques used in the three cases—including search warrants on email accounts, the use of undercover offices, trash pulls, and financial investigations—and offers suggestions for applicants requesting CARES Act funding. It notes that “the swift and aggressive investigations and filing of criminal complaints in these cases serve as a forceful message of deterrence against those who may seek to defraud CARES Act relief programs.”
Maurice Fayne, 'Love & Hip Hop: Atlanta' Star, Arrested for Fraud, Federal Officials Say: Georgia reality TV star Maurice Fayne has been charged with bank fraud after misusing more than $1.5 million of Paycheck Protection Program funds to allegedly buy, among other things, $85,000 in jewelry, lease a Rolls-Royce, and pay child support. Fayne had certified that over $2 million he received would be used to retain workers and pay for business-related expenses like mortgage and utility payments.
Texas Man Charged with Allegedly Seeking More Than $5 Million in SBA Coronavirus Loans by Submitting 400 Fake Employee Names: Samuel Yates has been charged in Texas with attempting to defraud the Paycheck Protection Program by claiming to have a business with more than 400 employees to seek more than $5 million in loans. Yates was successful in obtaining a $500,000 loan. He used a random name generator to come up with a list of purported employees.
The Rise of White Collar Crime in Times of Fiscal Uncertainty & COVID-19: In a video provided by the University of Maryland, practitioners, a professor, and a media personality discuss the likely rise of white collar crime as a result of COVID-19, economic stimulus packages, and the economic downturn.
Guest Post: COVID-19 and Corruption–Two Risks and One Opportunity: A post in the Global Anticorruption Blog by a program officer for the Center for International Private Enterprise’s Anti-Corruption and Governance Center outlines three ways he believes COVID-19 will interact with corruption. First, corruption might hinder government’s response to the crisis and reveal ways that corruption has been occurring in the shadows as systems’ weaknesses are made clear; second, “corrupt governments and leaders will use COVID-19 as an excuse to increase their discretion and control over society;” and, finally, governments are—in one positive development—adopting creative and practical solutions to teleworking, which, in some cases, results in an increase in transparency.
Heightened Transparency of Stock Trading by Public Officials Could Help Convey Reliable Information in Crises that the Public Deserves to Know: The Global Anticorruption Blog looks at allegations that Senator Richard Burr may have used nonpublic information to inform his decision to sell hundreds of thousands of dollars of stocks less than a week after he published a reassuring op-ed that suggested the U.S. was more than ready to handle any COVID-19-related challenges. The author argues that laws should be amended to require transparency about those trades “because stock trading by public officials—if it is sufficiently transparent—may perform a useful public function, because it conveys information to the public that politicians may otherwise prefer to keep hidden for improper political reasons.”
MCLE Rules Changes: The ABA has helpfully compiled state-by-state continuing legal education (CLE) adjusted requirements COVID-19, including the suspension of requirements for in-person CLEs in some states.
Meeting your Ethical Responsibilities During the COVID-19 Global Pandemic: Ethics Counsel for the Virginia State Bar reminds lawyers that the duties of competence, communication, and confidentiality, among others, remain in place during crises or emergencies like COVID-19. One tip he offers is to unplug smart listening devices like Alexa when communicating with clients from home. He also includes links to several resources that might be of interest.
Judge Taps Special Prosecutor to Sidestep County Attorney: A judge in Texas has appointed a special prosecutor to enforce violations of the governor’s COVID-19-related executive orders after the county attorney refused to do so. Judge Vincent Messina noted that the county attorney Matt Mills also refused to delegate the duty to his staff. Mills earlier called the executive orders “unjust and unconstitutional.”
Focus on Kelly v. United States
In early May, the U.S. Supreme Court issued a decision in Kelly v. United States—often referred to as “Bridgegate”—reversing the conviction of New Jersey officials who shut down two out of three lanes of traffic on a major bridge to retaliate against a mayor who did not support the incumbent governor’s campaign. In a unanimous decision, the Court ruled that federal prosecutors were required to prove that the state lost “property” as a result of that scheme to prove the charges they filed: wire fraud and fraud on a federally funded program or entity. While acknowledging that “[t]he evidence the jury heard no doubt shows wrongdoing—deception, corruption, abuse of power,” the Court rejected the government’s theory that the state’s property was taken by the defendants’ commandeering of the access lanes and diversion of the wage labor of employees who were required to carry out that effort. Instead, Justice Elena Kagan wrote for the Court, “[t]he realignment of the toll lanes was an exercise of regulatory power—something this Court has already held fails to meet the statutes’ property requirement. And the employees’ labor was just the incidental cost of that regulation, rather than itself an object of the officials’ scheme.” Later in the opinion, the Court acknowledged that the scheme may well have violated New Jersey law, writing “[t]he upshot is that federal fraud law leaves much public corruption to the States (or their electorates) to rectify,” and citing New Jersey’s official misconduct statute. Much as McDonnell v. United States did in 2016, the decision unleashed opinion pieces discussing its potential impact on anticorruption enforcement and the need for robust enforcement of existing state corruption statutes. A common theme was the need for robust anticorruption enforcement by state prosecutors. Those opinion pieces include the following:
- The U.S. Supreme Court’s Opinion in the “Bridgegate” Case: Some Quick Reactions: Harvard law professor concluding that the decision was “probably correct, and certainly defensible.”
- Prosecuting Public Corruption Cases Like Bridgegate is Nearly Impossible: Michigan law professor writing in the Washington Post refers to Kelly as one “a string of failed corruption cases,” including McDonnell, that has made it “almost impossible to put a crooked politician in jail,” thus “shield[ing] officials from accountability and made public corruption inevitable.”
- Law Profs: Stop the Overheated Rhetoric About Bridgegate: Response to above Washington Post article and other coverage that argues that Kelly is simply “the latest round in a 30 plus year back-and-forth among Supreme Court justices, federal prosecutors, Congress, and academics on a critical issue of law enforcement and American democracy: the power of federal prosecutors to set standards of integrity and good government for state and local officials.”
- Supreme Court’s Reversal of “Bridgegate” Convictions Exposes Limits of Frequently-Charged Federal Crimes: Private sector perspective that concludes that the decision “established meaningful limits on federal prosecutors’ ability to use the wire fraud statute to prosecute public corruption cases… [that] is likely to have significant implications for public corruption cases in the future.”
- Where the Real Blame for Letting Bridgegate Defendants Off Lies: In a two-part series, an author argues that the Supreme Court’s decision is the responsibility of the executive and legislative branches—not the judiciary. In the piece discussing Congress, the writer argues “Congress should direct that data on state-level corruption prosecutions be collected”—an effort that is underway at CEPI.
As Criminal Investigation Looms, 2nd Circuit Nixes Subpoenas of Attorney Who Filed Sealed Info on Felix Sater: In a case that serves as a reminder about the need to have an active grand jury issue grand jury subpoenas, as well as the distinction between civil and criminal contempt, the Second Circuit U.S. Court of Appeals issued a decision addressing the investigation of attorney Frederick Oberlander. The decision recounts how Oberlander’s lengthy periods of noncompliance with a series of grand jury subpoenas resulted in the expiration of several grand jury terms, which required the issuance of new, nearly identical subpoenas by each successive grand jury for the district court to have jurisdiction to enforce the subpoenas. The circuit concluded that some subpoenas that were the subject of the appeal were unenforceable, as they were either not issued by sitting grand juries or those grand juries had expired, and could not be enforced through the coercive power of civil contempt. However, it also held that subpoenas issued by a sitting grand jury would be enforceable and pointed out that the district court had the power to initiate criminal contempt proceedings—which were punitive rather than coercive—in light of Oberlander’s “recalcitrance and repeated violations of court orders.” Oberlander had been previously suspended from the practice of law for conduct related to the matters the federal government was investigating—namely, the improper release of sealed documents in an effort to force another party to settle—but that suspension was vacated earlier this year.
King & Spalding Resists WhatsApp's 'Drastic' Disqualification Bid in Cyber Case: Instant messaging system WhatsApp has sued a client of King & Spalding alleging that client exploited it to gain unauthorized access to user communications. WhatsApp has now moved to disqualify King & Spalding from representing the defendant, arguing that the firm’s representation of it in a sealed matter four years ago has created an unwaivable conflict. King & Spalding’s counsel have argued in response that none of the lawyers—including FBI Director Chris Wray—remain at the firm and the matters are not substantially related. Press surrounding the case “led to widespread public attention that contrasted Wray’s advocacy for WhatsApp as a private lawyer and his statements as FBI director questioning technological barriers that can impede law enforcement investigations.”
Ex-prosecutor Juan Martinez reprimanded for appealing to jurors’ emotions: In Arizona, former Maricopa County prosecutor Juan Martinez—who prosecuted the Jody Arias case—has been reprimanded by the state’s supreme court for improperly appealing to jurors’ emotions, among other things, in several other capital cases. The court noted that even though it had not reversed any of the decisions in which Martinez acted improperly, that fact “does not absolve him of ethical culpability.”
Judge Faces Ethics Charges for Reality TV Show Featuring Courtroom Domestic Violence Cases: Florida judge Carroll Kelly is facing ethics charges after allowing producers of a reality TV show to film actual domestic violence cases in her courtroom. Shortly before entering her courtroom, litigants—including victims—were presented with a waiver form that required them to agree not to sue the show and to pay attorney fees and costs for the show and its producers if they did. Even litigants who did not sign the waiver were filmed.
Audit Alleges One County Attorney Paid Wife $126K Bonus, Another Funded Personal Expenses: The Kentucky auditor of public accounts has referred findings about two county attorneys to the FBI and the state attorney. One county attorney allegedly paid his wife—who he hired to work for him—a $126,500 bonus, and another allegedly used county funds to pay for personal expenses.
Lawyer Contends 'SILENCE. (BOOM SHAKALAKA)' Satisfies Ethics Rule; Top State Court Disagrees: A lawyer in Massachusetts who responded to bar counsel’s request for information by what the lawyer characterized as “SILENCE. (BOOM SHAKALAKA)” was suspended from the practice of law. The short decision concluded that “Silence in the face of bar counsel's request for information is not, as the respondent claims, a ‘response’ categorically protected by the privilege against compelled self-incrimination under the Fifth Amendment to the United States Constitution.”
Hennepin County Chief Public Defender Is Reprimanded Over Social Media Posts: Hennepin County, Minnesota Chief Public Defender Mary Moriarty has been disciplined for making inappropriate social media comments. She had been previously suspended from her job while the investigation was completed.
Lawyer Is Suspended for Giving Client's Business a Bad Review In 'Good for the Gander' Retaliation: A New Jersey lawyer who disclosed his client’s criminal history in a negative review of her business has been suspended. Brian LeBon Calphin posted the negative review to retaliate against the client for her poor online reviews of his legal services.
Is a Client Using Your Legal Services to Commit A Crime? New Ethics Opinion Outlines Your Duty to Inquire: The ABA has issued Formal Opinion 491 to clarify lawyers’ ethical duties to inquire if their clients are seeking to use their services to commit fraud or other crimes. The opinion also references the ABA Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing.
FinCEN Reissues Real Estate Geographic Targeting Orders for 12 Metropolitan Areas: The Financial Crimes Enforcement Network (FinCEN) is continuing to require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate in Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco, and Seattle. These requirements mean that prosecutors in those jurisdictions should be able to obtain information about the beneficial owners in cash real estate transactions—which may be useful in money laundering and other white collar investigations.
Here’s Every Change the DOJ Made Monday to Its Corporate Compliance Program Evaluation Guidance: The U.S. Department of Justice has updated its corporate compliance program evaluation guidance. That document sets forth factors the DOJ will consider when making decisions about charging corporations, resolving cases, imposing monetary penalties, and requiring a monitorship or ongoing reporting obligations.
Netanyahu Corruption Trial Begins, Taking Israel Into Uncharted Territory: The trial of Israel Prime Minister Benjamin Netanyahu has begun. He is charged with bribery, breach of trust, and fraud. The trial is expected to last at least a year and the first witness is not expected to testify for months.
Is Nigeria Turning Around Its Anti-Corruption Enforcement? A commentator argues that Nigeria’s corruption-fighting efforts are becoming more effective and include resolutions like plea bargains and asset forfeiture.
Dissolving Congress to Combat Corruption: Why a Short-Term Anticorruption Victory in Peru Isn’t Worth the Long-Term Cost: In Peru, the president dissolved the Congress last fall and held snap elections earlier this year in response to what he characterized as concerns about corruption. A commentator argues that “[w]hatever its short-term payoffs, this decision threatens to undermine Peru’s institutional checks and balances, leaving the country more vulnerable to corrupt actors in the long term.”
Amie Ely is the Director of the Center for Ethics & Public Integrity and the Editor of the CEPI Newsletter and may be reached at 202-326-6041. The CEPI Newsletter is a publication of the National Association of Attorneys General. Any use and/or copies of this newsletter in whole or part must include the customary bibliographic citation. NAAG retains copyright and all other intellectual property rights in the material presented in this publication. For content submissions or to contact the editor directly, please e-mail firstname.lastname@example.org.