White Collar Roundup - August 2015

Extortion: Your Tax Information or an Audit

The Third Circuit in United States v. Fountain addressed the mental states required to violate the Hobbs Act's prohibition of extortion under color of official right. In the case, Patricia Fountain, an employee with the Internal Revenue Service (IRS), orchestrated schemes to file false tax returns in order to fraudulently obtain cash refunds from the IRS. Fountain and her co-conspirators recruited people to provide their information and agreed to pay them a portion of the expected cash refund. Some of the people who agreed to provide their personal information were then directed to pay Fountain a $400 fee. They were told that Fountain would "red flag" them if they refused. Fountain was convicted of Hobbs Act extortion under color of official right and appealed. In its opinion, the Third Circuit laid out the rules regarding color-of-official-right extortion. The court said that it would "uphold a conviction for Hobbs Act extortion where the evidence indicates (1) that the payor made a payment to the defendant because the payor held a reasonable belief that the defendant would perform official acts in return, and (2) that the defendant knew the payor made the payments because of that belief." Applying that standard, the court affirmed Fountain's conviction.

Tough Luck for a Qui Tam Fraudster

The Ninth Circuit in United States ex rel. Schroeder v. United States decided that a fraudster-come-whistleblower could not be a qui tam relator. CH2M Hill is a contractor with the U.S. Department of Energy (DOE) in Washington state. During the course of its work for DOE, CH2M Hill engaged in widespread fraudulent billing of hourly work. Carl Schroeder, a CH2M Hill employee, was among the fraudulent billers. In September 2011, after the DOE's Office of the Inspector General (OIG) got wise to the scheme, Schroeder pleaded guilty to conspiracy to commit fraud. Before the charges were filed and while the OIG was investigating, Schroeder filed a qui tam suit against CH2M Hill. In August 2012, the United States intervened in the suit and "moved to dismiss Schroeder as a relator based on his felony conviction." The district court dismissed Schroeder, and he appealed. The Ninth Circuit held that the plain language of 31 U.S.C. 3730(d)(3) prohibits any participants in the scheme - no matter how minor a role they played - from being relators. As a result, the court affirmed.

Pyrrhic Victory for Blagojevich

The Seventh...