SEC Busts Insider Trading With Help of Ex-Wife

Karen and David Zilkha’s marriage ended in messy divorce proceedings that included spousal abuse, restraining orders, an ongoing battle over their nine-year old twins and a SEC investigation.

Their marriage began in 1998 in Washington State where Mr. Zilkha worked for Microsoft. By 2001 the family had moved to Connecticut and a new job for Mr. Zhilka as a trader with hedge fund Pequot Capital Management. By 2003 their marriage was over and the divorce wars began. Eventually the financial aspects of their divorce were completed with Ms. Zilkha receiving $750,000.00 in assets including the family home.

The conflict started up again in 2008 when child support was to be reviewed. Mr. Zilkha filed updated financial information which included disclosure of a sum of $2.1 million. His ex-wife and her lawyer were mystified about the emergence of this asset, but then Ms. Zilkha remembered that before the collapse of the marriage, her husband had told her that he was negotiating a payment from Pequot.

Ms. Zilkha’s attorney knew that her client had kept the family computer and wondered if there was information about this money in old emails. What she found turned the case from a high conflict divorce case to a Securities Exchange Commission investigation of insider trading.

Emails retrieved from the computer hard drive provided proof that Mr. Zilkha had obtained confidential information from a former colleague at Microsoft that led to Pequot selling Microsoft shares with a payout to Pequot of $14 million.

Investigators at the SEC had long suspected that Mr. Zilkha had been involved in insider trading but with no “smoking gun” the investigation had languished.

CEO of Pequot, Arthur Samberg and Pequot paid fines and penalties to settle the case amounting to $28 million. Mr. Samberg, once the world’s largest hedge fund manager, sold the assets of Pequot and shut it down. Mr. Zilkha faces administrative charges with respect to his role as “tipper”.

Did Ms. Zilkha eventually get her child support? Don’t know, but under new legislation she received a reward of $1 million from the SEC for providing the evidence that was needed to convict.

Lawdiva aka Georgialee Lang

Judges’ “Cash for Kids” Fraud Tied to the Mafia

Two Pennsylvania Judges have been locked up for 17 years and 28 years for incarcerating 4,000 innocent young offenders in exchange for $2.8 million dollars in payments from the owner of two private, for-profit, youth correctional centres.

Judge Michael Conahan, who plead guilty, received a 17-year sentence, while his co-conspirator Judge Mark Ciavarella, who denied his guilt throughout a lengthy trial, was found guilty and sentenced to 28- years imprisonment.

Conahan’s lawyer advised the media that his client was “bitterly disappointed” with the lengthy sentence but would not appeal. During the sentencing former Judge Conahan apologized to the children and their families saying “My actions undermined your faith in the system and contributed to the difficulty in your lives. I am sorry you were victimized.”

The Pennsylvania Supreme Court has now overturned 4,000 of the juvenile convictions.

Conahan and Ciavarella initially plead guilty to honest services fraud and tax evasion and plea-bargained a 7-year sentence, however, the trial judge refused to accept the plea, ruling that neither
offender had accepted responsibility for their actions.

The judicial scam unravelled when reputed mob boss William “Big Bully” D’Elia was arrested on charges of witness tampering, solicitation of murder and conspiracy to launder drug money and turned government informant. D’Elia and Judge Conahan were buddies.

D’Elia sang like a canary after he was arrested and no wonder, he faced 30-years in prison and a $750,000 fine. He was sentenced to nine years in jail which was later reduced by 21-months for his testimony in another high-profile Pennsylvania case involving casino owner Louis DeNaples and his priest Father Sica.

Conahan must also pay fines and restitution of almost $900,000 and will likely be sued civilly by his victims’ parents.

Was it worth it? I think not. Contrary to Hollywood hype, greed is never good. All the world’s religions condemn greed: “For the love of money is a root of all evil.” 1 Timothy 6:10

Lawdiva aka Georgialee Lang

No Place For Bounty Hunters in Canada

The Canadian and American justice systems have many similarities but they also differ dramatically in the area of bail for those charged with criminal offences.

While both jurisdictions favour the release of alleged offenders on specific conditions pending trial, including the posting of bail, bounty hunters and bail bondsmen proliferate in the United States. In Canada, bail bondsmen and bounty hunters are illegal and to world-wide critics of the practice, immoral and discriminatory.

And Canada is not alone. Most countries, with the exception of the Philipines, will charge a bounty hunter with kidnapping if they remove a citizen, albeit a fugitive, from their soil. The authority of a bounty hunter does not extend beyond the jurisdiction of his or her home country or state and even in America, where several states have outlawed bounty hunters, including Illinois, Kentucky, Wisconsin and Oregon, a fugitive-finder must exercise extreme caution.

That is why the world’s best known bounty hunters, Duane and Beth Chapman, aka Dog the Bounty Hunter’s, recent threats to capture Oscar-winning actor Randy Quaid, now living in Vancouver, can’t be taken for more than a publicity ploy timed for the start of their new season on A&E television.

Dog surely knows that Canada and the U.S. entered into a memorandum of understanding in 1988 that provides there will be no cross-border kidnapping of Canadians.

He certainly is intimately familiar with the aftermath of interfering with a U.S. citizen on foreign soil after the clandestine removal of sex offender and Max Factor trust-fund beneficiary, Andrew Luster from Mexico. Luster was successfully returned to California to serve his 124-year sentence. Dog went home to Hawaii and was later arrested by police as a result of an extradition request by the Mexican government. After a night in jail he posted bail and eventually the Mexican authorities dropped the criminal charges against him. It made for good television.

There are, however, clever ways to fool a fugitive into slipping back into the United States so that a legal capture can occur. Businessman Fred J. Gilliland fled the United States after his massive securities frauds were uncovered. He escaped to West Vancouver where it was reported he lived in the lap of luxury. Gilliland had ripped off hundreds of people and had more than just a few enemies as a result of his criminal behavior. One of his enemies was a British Columbia resident who alleged he had been suckered into one of Gilliland’s fraudulent schemes and lost $200,000 dollars.

Brian Van Vlack, who described himself as a private investigator, befriended Gilliland, eventually luring him for lunch to Point Roberts, a sleepy beach town, that happened to be a sliver of land that was part of the State of Washington. Just as lunch began, American police emerged, arrested Gilliland and returned him to Florida to face the music.

I suspect that Randy Quaid will not be as gullible or cocky as Gilliland, and after all, why would Quaid visit the U.S? He has pretty much burned all his bridges there.

Lawdiva aka Georgialee Lang

Judge Jailed in “Cash for Kids” Case

When I think of judicial corruption, I think of Russia, Iran, Zimbabwe, Yemen and other countries where justice can be bought and sold. I never think of Pennsylvania. When I think of Pennsylvania I envision rustic Amish carts drawn by horses and little girls wearing bonnets.

I only hope none of the little Amish girls were victims of a kickback operation engineered by former Pennsylvania State Court Judges Michael Conahan and Mark Ciavarella Jr. Together they arranged to close down the government-run juvenile detention facility and order young offenders to serve time in two private juvenile detention centres owned by a friend, in exchange for money: $2.8 million.

It went something like this. A juvenile offender would appear in their court on a petty offense, say theft or failing to appear. With no lawyer to assist them and contrary to a probation officer’s recommendation, Judges Conahan and Ciavarella would find the minor guilty and order them to serve a custodial sentence in their friend’s juvenile prison. One of the conspirators in the plot was a well-known lawyer, Robert Powell, who eventually wore a wire to obtain incriminating evidence against the Judges in exchange for a plea deal for himself.

Upon their arrests in 2009 the Judges resigned their elected positions and almost immediately entered into plea bargains to plead guilty to honest services fraud, wire fraud and tax evasion, in exchange for seven year prison sentences. At the plea hearing, it was apparent to the trial judge that Judge Mark Ciavarella would not admit that he was involved in a “cash for kids” deal, minimizing the transactions to payments he called “finders fees”. The trial judge refused to accept the plea deals and ordered bail of $1 million for each of the accused.

A grand jury then handed down a phalanx of new charges including racketeering, fraud, money laundering, extortion, bribery and multiple tax violations. Not to mention a class action civil suit brought by four hundred of the victimized juveniles and their parents.

While Judges Conahan and Ciavarella are protected by judicial immunity for their judicial functions, counsel in the class action suit intend to argue that their deliberate fraud ought to permeate that immunity. As well, administrative decisions made by a judge are not caught by judicial immunity.

Judge Conahan made a second plea deal for one count of racketeering and is still awaiting his sentence, while Judge Ciavarella vowed to fight on. A bad decision, since today Judge Mark Ciavarella was sentenced to 28 years in prison, still maintaining he had done nothing wrong.

The reputation of a province or state’s justice system cannot tolerate rogue judges who do more than damage the victims of their crimes; they undermine a community’s trust in one of the most sacred foundational principles of a democracy: The Rule of Law.

Social reformist Henry Ward Beecher succinctly stated: ” Taking all the robes of all the Judges that have lived on the face of the earth, and they would not be large enough to cover the iniquity of one corrupt Judge.

Lawdiva aka Georgialee Lang

One Million Dollar Judgment Against Canada Revenue Agency Tossed Out

Hal Neumann had a great life with a succesful business in Saanich British Columbia until Canada Revenue Agency investigators showed up at his home one morning with two police officers and a search warrant.

Mr. Neumann was the President of Vantage Equipment Company Ltd., a company that bought and sold used mining and construction equipment. He had an office in Duncan BC and a home office.

One of Vantage’s good customers was Ms. B. who was being investigated by CRA for tax evasion. Taxation investigators learned through a routine audit of Vantage that Mr. Neumann’s company had paid commissions of $400,000 to Ms. B. A criminal investigation was also instigated.

Mr. Neumann alleged he suffered post-traumatic stress disorder and depression as a result of CRA’s search and seizure of documents from his home. In a jury trial, Neumann made claims for unreasonable search and seizure pursuant to Canada’s Charter of Rights and Freedoms and “negligent investigation” by CRA, a novel action that relied on a 2007 Supreme Court of Canada case, where it was decided that a botched police investigation may give rise to a negligence claim on behalf of a suspect wrongly convicted of a crime.

Psychiatrist Dr. Lohrasbe, testified that Neumann’s stress disorder and depression were legitimate and caused Mr. Neumann’s life and business to suffer. He also opined that Neumann’s childhood in communist Germany and his escape to West Germany at the age of four, compounded his fear and contributed to his mental impairment.

The jury hearing Mr. Neumann’s case awarded him damages of $1.3 million, an extraordinary verdict against CRA. However, in Reasons for Judgment released today (Neumann v. Canada 2011 BCCA 313) by British Columbia’s Court of Appeal, Mr. Neumann lost his case and the money.

A unanimous Court granted CRA’s appeal and dismissed Mr. Neumann’s actions. The Appeal Court considered whether CRA was under a duty to Mr. Neumann to carry out the least intrusive search that was possible in the circumstances.

Neumann’s lawyer argued that CRA ought first to have approached Mr. Neumann for a voluntary release of the documents they needed to prove tax evasion and fraud against Ms. B. CRA explained that given the volume of business between Mr. Neumann and Ms. B. they could not take the chance their business relationship would not cause Mr. Neumann to take steps to protect Ms. B.

Neumann’s lawyer also complained that in obtaining the search warrant, CRA failed to advise the judge who granted the warrant,that Vantage’s place of business was Mr. Neumann’s home and that Neumann had fully cooperated in the earlier audit of Vantage, which constituted “material non-disclosures”.

CRA investigator, George Hodgson testified that he was not aware that Vantage’s office was in Neumann’s home and the Court of Appeal noted that at trial, Neumann’s lawyer advised the trial judge his client was not challenging the validity of the warrant.

The Appeal Court ruled there was no evidence of negligence in respect to the search warrant and no breach of the Charter. However, CRA was not awarded costs against Mr. Neumann, the court finding that in hindsight, Crown lawyers ought to have asked the trial judge to dismiss the lawsuit before beginning their case.

A very sensible outcome and perhaps yet another example of jury bewilderment.

Lawdiva Updates on Recent Stories

CONRAD BLACK is back in the news again and will be resentenced tomorrow in a Chicago courtroom. You may recall that the United States Supreme Court struck down the law referred to as “honest services fraud” and set aside Lord Black’s convictions on those counts. What remained was the conviction for obstruction of justice (his removal of boxes of documents from his office) and another count of fraud.

Black has been out of prison on bail since his honest fraud convictions were struck. He and his attorneys hope for a ruling that will end his previous sentence of six and a half years, of which he served two years, before being bailed out last year.

One of the issues that will take centre stage at the resentencing is whether Mr. Black has acted as an arrogant dilettante in prison, as the prosecutors argue, or as a contrite educator and mentor to his fellow prisoners. For previous stories on Lord Black go to posts on July 8, July 19 and November 2, 2010.

GREG FULTZ, the disgruntled ex- boyfriend, who used a billboard on the main street of his town in New Mexico to accuse his former girlfriend (unnamed) of killing his baby when she had an abortion, was ordered by the court to immediately remove the sign. Fultz’s ex-girlfriend sued him for harassment and violation of privacy.

Fultz’s lawyer said his client’s right to free speech was ignored and he intends to appeal the ruling. His view is that the statement on the billboard is an anti-abortion message, which he has the right to promulgate. Fultz says he is willing to go to jail if necessary. Read the original story posted on June 7, 2011.

Lawdiva aka Georgialee Lang

Legal Chutzpah

Marc Dreier is another convicted white-collar crook, and he’s today’s example of legal “chutzpah”.

In 2009, about the time Bernie Madoff was exposed, Marc Dreier’s world came crashing down. Dreier was a lawyer in New York City who founded a major law firm. He was the sole partner and his 250 plus lawyers and staff were well paid, but did not participate in the firm’s profits.

Dreier was successful, but he wanted to be a billionaire, not just a millionaire.

One of his most audacious acts was to borrow $100 million from a hedge fund on behalf of a wealthy client. Dreier impressed the hedge fund manager and after the manager reviewed Dreier’s forged documents, the hedge fund loaned the money, without ever speaking to Dreier’s client. Dreier used the funds to prop up his over-extended law firm and to indulge in the finer things of life, including a large beach house in the Hamptons and an opulent yacht.

One day Dreier got a call from the hedge fund manager. Dreier’s client had defaulted on a payment. Dreier assured the manager that all his client needed was a short extension of time and all would be well.

Dreier suggested that the hedge fund manager come to his client’s lavish Wall Street office, to meet with him and his client and sort things out.

Here’s where the chutzpah comes in! Dreier called his client and asked if he could use a boardroom at his office. Not a problem.

Dreier showed up with an actor hired to impersonate his wealthy client and convinced the hedge fund manager that everything was under control. Dreier bought himself a little more time before his Ponzi scheme collapsed in ruins. He was arrested in Toronto, in the midst of another scam.

Dreier escaped the media scrutiny that Madoff couldn’t avoid, mainly because Dreier’s fraud only amounted to $400 million, while Madoff’s was $65 billion. As well, Dreier turned himself in two days before Madoff was arrested and thereafter, Madoff took centre stage.

Dreier is where he belongs, serving 20 years. He gets my vote today for legal chutzpah!

Lawdiva aka Georgialee Lang

Internet Scams

I received an email the other day from a woman in Japan who wanted to retain me to assist her to collect a large sum of money from her ex-husband who happened to live in Vancouver. She asked me to begin by writing to her ex to determine if he would pay the sum he owed voluntarily or whether it would be necessary to commence a court action.

From the get-go it smelled like a scam, so in return I sent her an email advising her that in British Columbia we had “know your client” rules which required that she provide picture ID to show who she was.

Not a problem. Within a day I received a copy of a passport and an official ID card in her name with a photo of her. Her emails were all unfailing polite and to a less suspicious individual she appeared to be an ideal client as she informed me that upon my successful collection of the monies owed I would be paid my legal fees in a generous amount.

At this point her scam was no longer amusing to me and I ended the email conversation. She contacted me several times thereafter wondering why her Vancouver lawyer had not been in touch.

Had I carried on with her she would have excitedly told me that my letter had served its intended purpose and that I should expect to receive a large cheque from her ex and would I kindly deposit it to my trust account and send her my trust cheque for the monies, less my generous fee.

Had I complied, she would have received her money from my account and I would be left owing my bank a large sum of money once it became obvious that the deposited cheque was worthless. The financial consequences to me would pale in comparison to the humiliation of being so thoroughly scammed.

This scenario is just one of the hundreds of internet swindles floating through cyberspace.

Have you heard of the “grandma” scam where a young adult posing as your grandchild, obtains enough information from Facebook and other social sites to pepper her email solicitation with accurate family information. She is in trouble and needs money to either get out of jail or purchase an airline ticket to fly home to escape a dangerous situation.

The “Nigerian” scam is so old it is truly surprising that it still nets internet crooks millions of dollars a year. If you could only send money to this Nigerian diplomat, he could obtain millions of dollars that belong to his family and share it with you!

The FBI reports that between 2000 and 2009 internet fraud accounted for $1.7 billion in financial losses to unsuspecting consumers. The best way to avoid being the victim of internet fraud is to assume that every email overture concerning money involves a criminal looking for a victim. Don’t let it be you.

Lawdiva aka Georgialee Lang

Canada To Make It Tougher For White-Collar Criminals

Canada’s minority Conservative government has persuaded the Bloc Quebecois, a French-Canadian party holding 49 seats, to get on board with their parole amendments for non-violent first offenders.

The House of Commons will vote today on a bill that is intended to abolish accelerated parole, a law that has allowed fraudsters and Ponzi scheme devotees to serve only one-sixth of their sentences before they are eligible for parole.

Stung by the massive fraud committed in Quebec by Norbourg founder and CEO Vincent LaCroix, the Bloc rarely sees eye-to-eye with government, however, Mr. LaCroix’s early parole is a significant motivating factor.

LaCroix ran a trust fund company that ripped off 9200 Quebec investors before it ceased operations in 2005. A year later Mr. LaCroix filed for personal bankruptcy. The investigation that followed revealed a pattern of funds diverted to LaCroix’s personal coffers, with false receipts and fraudulent reports.

Convicted of securities violations, Mr. LaCroix was sentenced to five years in prison but served less than two years. The securities hearing was followed in January 2008 by a 58 day criminal trial where he was convicted of 51 charges and sentenced to 12 years in prison and a $255,000.00 fine. The sentence was reduced on appeal to five years.

In June 2008 a further 922 charges of fraud, conspiracy and money laundering were levied against Mr. LaCroix and six others, including a high-level public servant. LaCroix plead guilty and received a 13 year prison sentence to run consecutively with his earlier punishment.

Now living in a Montreal half-way house, LaCroix served one-sixth of his sentence. His victims are outraged although their anger was slightly assuaged when they learned that each of them would be fully reimbursed for their losses.

LaCroix will be free to leave the half-way house when he has served one-third of his sentence.

Prime Minister Harper campaigned on criminal justice issues and will likely bring forward further legislation to advance his Conservative agenda. His parole bill once passed in the House of Commons will go to Canada’s Conservative-majority Senate for approval.

Lawdiva aka Georgialee Lang

Judge Spends Foster Care Payments at Spas and Casinos

An Oklahoma judge and her husband are charged with 36 counts of fraud and perjury in relation to their fostering and adoption of three year-old twins.

Judge Tammy Bass-Lesure and husband Karlos Lesure began fostering the boy and girl in 2008 after the children had been removed from their addict mother’s care. But while the Lesures collected the sum of $730.00 every month, the children were being raised by Judge Lesure’s court bailiff’s sister.

The Lesures later adopted the twins and continued to receive state funds in the form of monthly adoption subsidies, available to parents of limited means. Despite Judge Lesure’s $120,000 annual salary, the couple filed for bankruptcy in 2009 with debts of $1 million.

Oddly, in the final adoption documents, the Lesures applied for a surname change for the children, but not their surname. They requested the children take the surname of her court bailiff’s sister.

Oklahoma investigators scrutinized Judge Lesure’s bank account established to receive the state funds and confirmed the monies were used to pay for services at spas, nail salons and at casinos.

Judge Lesure however, is no stranger to controversy. Elected to the bench twelve years ago, she ran into some trouble last summer and was forced to recuse herself from a high-profile murder trial. At the time she had been working out with her personal trainer, Colton Taz Ama, who was also a defendant in her courtroom accused of drug offences.

While at the gym she and Mr. Ama discussed his pending case. He was wired and recorded their conversations which included her advice that he fire his lawyer and hire another lawyer, recommending several, including one of the lawyers appearing before her in the murder trial. It is also alleged she advised Ama that she was “willing to work a deal” and the recommended lawyers “know how she rolls”.

After her recusal she was removed from the criminal docket and assigned only cases of probate, adoption and guardianship.

Meanwhile, two weeks after Judge Lesure was fingerprinted and photographed on the felony charges she returned to her seat on the bench. As an elected judge she can only be removed by the State Court of the Judiciary.

Perhaps this is one good example of why judges should be appointed after rigorous scrutiny, rather than elected in popularity contests?

Lawdiva aka Georgialee Lang