Antitrust Law Daily Wrap Up, TOP STORY—2d Cir.: Convictions against former UBS execs upheld in municipal bonds case, (Jun 4, 2015)

By Jeffrey May, J.D.

Three former UBS AG executives were unable to convince the U.S. Court of Appeals in New York City to overturn their convictions for participating in fraud schemes related to bidding on contracts for the investment of municipal bond proceeds. The superseding indictment naming the individuals was not time-barred. The appellate court also rejected remaining arguments challenging convictions on the ground that they were without merit (U.S. v. Heinz, June 4, 2015, per curiam).

The Department of Justice Antitrust Division brought the initial charges against Gary Heinz, Michael Welty, and Peter Ghavami in December 2010. A six-count superseding indictment against the men was filed in September 2011.

In August 2012, following a jury trial, all three defendants were convicted of conspiracy to commit wire fraud in violation of 18 U.S.C. §§ 371 and 1349, and Heinz and Ghavami were also convicted of wire fraud in violation of 18 U.S.C. § 1343. Heinz was found not guilty on one count of witness tampering, and Welty was found not guilty on one count of substantive wire fraud.

Statute of limitations. On appeal, the defendants contended that the superseding indictment should have been dismissed as time barred. They unsuccessfully argued that the five or six-year statute of limitations for wire fraud and wire fraud conspiracies should have been applied instead of a ten-year statute of limitations for fraud affecting a financial institution. If the shorter limitations periods were applied, then each fraudulent transaction identified in the indictment was outside the limitations period, according to the defendants.

Under 18 U.S.C. § 3293(2), the statute of limitations is extended to ten years for wire fraud offenses (including conspiracy to commit wire fraud) “if the offense affects a financial institution.” According to the appellate court, banks executed “Bank Agreements” prompted in part by the fraudulent conduct of the defendants and their co-conspirators. Further, “the role of the banks as co-conspirators in the criminal conduct [did] not break the necessary link between the underlying fraud and the financial loss suffered.” Thus, because the defendants’ wire fraud offenses “affected” the banks and the charges in the superseding indictment were within the applicable ten-year statute of limitations, the motion to dismiss on statute of limitations grounds was properly denied.

Remaining issues on appeal. In a separate summary order, the appellate court rejected the defendants’ other arguments for reversal. The defendants unsuccessfully argued that: (1) the government should have been judicially estopped from arguing that their conduct affected financial institutions where the original indictment and co-conspirators’ plea agreements did not state whether the fraud “affected a financial institution,” (2) the government engaged in a Brady violation by failing to disclose a particular e-mail, and (3) the district court erred in its jury instruction and evidentiary decisions.

Municipal bonds investigation. In addition to these three convictions, more than a dozen individuals have pleaded guilty to charges stemming from the government’s investigation into anticompetitive conduct in the municipal finance industry. Three former executives of General Electric Company who were convicted in the probe had their convictions on wire fraud conspiracy charges reversed on statute of limitations grounds by the U.S. Court of Appeals in New York City in 2013. A lone corporate defendant, Rubin/Chambers, Dunhill Insurance Services, also known as CDR Financial Products, pleaded guilty in 2011.

The case is No. 13-3119-cr(L).

Attorneys: Finnuala K. Tessier for U.S. Department of Justice. Gregory Lawrence Poe (Poe & Burton PLLC) for Michael Welty. Charles A. Stillman (Stillman & Friedman, PC) for Peter Ghavami. Marc Lee Mukasey (Bracewell & Giuliani LLP) for Gary Heinz.

Companies: UBS AG

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