White-Collar Crime

  • January 10, 2011
    A former N.Y. broker accused by the Securities and Exchange Commission of seriously mishandling a charity's brokerage accounts marks a "new low for con men everywhere," reports The Huffington Post.

    The recent SEC investigation resulted in forcing an end to the brokerage career of Paul George Chironis, who has also agreed to pay $350,000 to the Sisters of Charity, a "group of mostly elderly nuns in the Bronx." The SEC concluded that Chironis had manipulated the charity's brokerage accounts to maximize profits for himself.

    The Post reports:

    According to the SEC's order, Chironis defrauded the nuns from January 2007 to January 2008 by churning the two accounts with low-risk tolerance that held primarily mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, as well as certain closed-end bond funds. The order further found that Chironis charged the nuns' accounts excessive and undisclosed markups and markdowns in riskless principal transactions.

    George S. Canellos, director of the SEC's New York Regional Office, said in a statement, "Chironis's irresponsible actions virtually guaranteed the convent's accounts would lose money due to the undisclosed and excessive costs being incurred while Chironis focused on generating substantial commissions for himself."

  • June 24, 2010
    The Supreme Court upheld a Washington State law that requires disclosure of information surrounding a ballot initiative that was intended to overturn a law extending equality to same-sex partners. In Doe v. Reed (pdf) the court ruled 8-1 that the state's interest in supporting its public records law overcame the First Amendment challenge brought by signers of the anti-equality petition.

    Last spring after Washington Governor Christine Gregoire signed a law expanding "the rights and responsibilities" of registered domestic partners to same-sex couples, a group called Protect Marriage Washington launched an effort to put the law before voters. The organization collected more than 137,000 signatures to place the equality law on the November ballot. (Voters did not overturn the equality measure.)

    Washington also has a public records law, Public Records Act (PRA), which allows the state government to release "any writing containing information relating to the conduct of government or the performance of any governmental or proprietary function prepared, owned, used, or retained by any state or local agency." Writing for the majority, Chief Justice John Roberts noted that the state considers referendum petitions to be public records. By late last summer, the Washington Secretary of State had received requests for release of public records surrounding the ballot initiative, including signers of the petition. The group advocating for the ballot initiative lodged a federal lawsuit arguing that the secretary of state should be enjoined from releasing the names, claiming disclosure would subject petition supporters to intimidation and threats, and that the PRA violated their First Amendment rights. The U.S. Court of Appeals for the Ninth Circuit overturned a lower court ruling that favored the petition signers and the decision was appealed to the high court.

    Roberts wrote, "Petition signing remains expressive even when it has legal effect in the electoral process. But that is not to say that the electoral context is irrelevant to the nature of our First Amendment review. We allow States significant flexibility in implementing their own voting systems. To the extent a regulation concerns the legal effect of a particular activity in that process, the government will be afforded substantial latitude to enforce that regulation. Also pertinent to our analysis is the fact that [public records law] is not a prohibition on speech, but instead a disclosure requirement."

    In this instance, the majority maintained that the state's interests in its electoral process were significant enough to overcome the First Amendment challenge from the petition signers.

    The government, Roberts wrote "assert two interests to justify the burdens of compelled disclosure under the PRA on First Amendment rights: (1) preserving the integrity of the electoral process by combating fraud, detecting invalid signatures, and fostering government transparency and accountability; and (2) providing information to the electorate about who supports the petition."

    Roberts said the majority concluded that Washington State's "interest in preserving integrity of the electoral process suffices to defeat the argument that the PRA is unconstitutional ...."

    In a closely watched case involving the "honest services" provision of a federal fraud law that was used to convict former Enron CEO Jeffrey Skilling, the high court found that the provision was wrongly employed in the case. The high court did not find the law unconstitutional, though as SCOTUSblog notes, three of the justices would have invalidated it as unconstitutional - Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy. But the majority opinion, written by Justice Ruth Bader Ginsburg concluded that in order to convict under the honest services provision, there must be evidence of bribes or kickbacks, The Associated Press reported.

    Ginsburg wrote in Skilling v. United States (pdf), "Because Skilling's misconduct entailed not bribe or kickback, he did not conspire to commit honest-service fraud under our confined construction ...."

    Reporting for the Los Angeles Times, David Savage said the decision "is likely to have far-reaching consequences and could affect the recent convictions of public figures and corporate executives - including former Enron Chief Executive Jeffrey Skilling and former Chicago newspaper magnate Conrad Black."