Articles Posted in Fraud, Embezzlement & White Collar Crimes

Current Macomb County Prosecutor Eric Smith has been charged with 10 separate criminal corruption offenses relating to the alleged misuse of money forfeited to Macomb County. This money comes from the forfeiture of funds and property of criminal defendants, most typically people accused of drug trafficking. He is charged with conducting a criminal enterprise, five separate counts of embezzlement by a public official, tampering with evidence, conspiracy to commit forgery, accessory to a crime after the fact, and public office misconduct. There are three other defendants in this case for their alleged acts that contributed to these crimes.

Original Case Details

The main thing at issue here is what Smith did with forfeiture funds that are seized by the police. Forfeiture funds are supposed to be spent on county police departments and the county’s sheriff department. Michigan State Police raided Smith’s office and home in an effort to uncover his alleged misuse of these funds. Investigators estimate that Smith embezzled approximately $600,000 since 2012 relating to the forfeiture funds. This money was allegedly spent on things such as television service to AT&T and DIRECTV to the tune of almost $30,000, retirement and Christmas parties, and nearly $100,000 in credit card charges that were reimbursed for various activities and expenses. Smith’s secretary appears on over 100 checks, where allegedly she would use her own credit card for purchases and Smith would reimburse her with checks that are paid out from forfeiture money. These forfeiture funds are controversial in nature, because they don’t require a conviction for the police to keep the money and property seized. Opponents of forfeiture funds see these accounts as slush funds for police to use how they please. Forfeiture funds are only supposed to be used in a way that enhances public safety and security, not for personal enrichment.

One form of criminal prosecution that has been on the rise throughout the state of Michigan has to do with the famed “Blue Sky Laws” which has consistently presented issues in the white collar sect of criminal prosecution. While the laws were put into place to protect investors, the application of the laws have led to a tremendous amount of confusion. The leader in criminal defense in the State of Michigan is Scott Grabel of Grabel and Associates. One of the ways that Grabel has earned his reputation is through the defense of “White Collar” crimes. Grabel, along with other leaders in the field provided insight on the matter. Let’s build an understanding of the law and then explore the practical application of the statutes in place.

To begin, there are federal requirements to the law. Securities are subject to state registration requirements under state securities laws. In our state we have several registration exemptions for offerings to a limited number of investors which makes the filing of foreign LLC’s in the state of Michigan a dangerous proposition. In some cases, Michigan exemption provisions are preempted by federal law but in many other cases they are not. When asked about the laws, Scott Grabel provided insight on the manner. Grabel was quoted as saying, “There is a danger to the Commerce Clause when we look at the issue of Blue Sky Laws globally. Generically speaking, all securities sold in a particular state must either be registered there or be exempt from registration; and all broker-dealers and their representatives must be registered there or be exempt from registration. The origination of the law causes a great deal of confusion for investors. People seem to think that Justice Joseph McKenna created the term in the famous Hall case but that’s not actually factual (Hall v. Geiger-Jones Co., 214 U.S. 539, [1917]). Without knowing how the term was created makes it almost impossible to see the evolution of the law. When our firm started to defense people charged with a violation of the law, we studied the origins and created case studies from there. The work put in on the front end of the litigation has helped us achieve a great amount of success for our clients.”

Matthew McManus, a partner at Ann Arbor Legal in Ann Arbor, Michigan weighed in on the civil litigation aspect. McManus stated, “Whenever our firm deals with foreign investors, we have a series of questions that have to be addressed, the first being how many investors does the company plan to have. There are a number of limitations that far too often get overlooked. If your client-intake is flawed, your entire representation can lead to harm for your client and a malpractice claim. Diligence is crucial in this regard.”

Recently, United States Attorney Patrick A. Miles, Jr. announced in a Department of Justice press release that Gregory Claxton, a resident of Kentwood, pleaded guilty to evading the payment of federal income taxes to the IRS for the years 2006 through 2012. According to the release, Claxton willfully evaded paying nearly $149,000 in taxes by placing property and money in the names of other individuals. He will now be required to pay more than $200,000 in restitution to the IRS, which includes interest along with $250,000 in fines; he also faces up to five years in prison.

Until 2000, Claxton was a certified public accountant according to court records. He was operating a tax preparation business for clients at the time he was investigated and found to be evading payment of taxes. Claxton transferred the deed of his home to a trust in his wife’s name, and also deposited money from his business into his wife’s bank accounts in order to make it appear he did not have the money to pay the taxes owed. Claxton met with the IRS to discuss the outstanding tax debt, and admitted transferring the deed of his house just two days earlier.

Those involved in the investigation include Jarod J. Koopman, Special Agent in Charge, IRS – Criminal Investigation and other IRS special agents. Assistant U.S. Attorney Sally J. Berens prosecuted the case.

On Monday, March 23, 64-year-old Kutub Mesiwala of Bloomfield Hills pleaded guilty to conspiracy to commit health care fraud, according to a recent news article at Mlive.com. Mesiwala was allegedly involved in a scheme in which he exploited Medicare by referring patients to a home health agency located in Detroit who paid him kickbacks, according to the U.S. Attorney’s office.

Mesiwala and owner of Advance Home Health Care Services Amer Ehsan were both involved in the scheme in which Medicare was billed for services to patients that were either never provided to those patients, or unnecessary. In all, the referrals by Mesiwala to the Advance Home Health Care Service resulted in billings paid to the home health care agency in an amount exceeding $770,000. Investigators also found that other agencies had received more than $118,000 from the fraudulent Medicare billings.

In July of last year, Amer Ehsan pleaded guilty to charges of conspiracy to commit fraud after collecting more than $3.5 million in Medicare billings. He is scheduled for sentencing on June 16. Mesiwala is scheduled to be sentenced October 5.