October 2, 2022

Volume XII, Number 275

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Former Portfolio Manager Convicted in Bond Fraud Trial

Headlines that Matter for Companies and Executives in Regulated Industries

Former Portfolio Manager Convicted in Bond Fraud Trial

On Friday, August 12, 2022, Daniel Small — a former portfolio manager for Platinum Partners LP (Platinum) — was convicted of securities fraud and conspiracy to commit securities fraud for his role in connection with a scheme to defraud bondholders of Black Elk Energy (Black Elk) — an oil company and one of Platinum’s largest assets. 

According to prosecutors, Small and others executed this scheme by secretly purchasing, through Platinum, $98 million of Black Elk’s $150 million of outstanding bonds. Small and others then transferred the bonds to related entities to conceal Platinum’s ownership of the bonds. As the final step in the scheme, according to the government, Small and others rigged a consent solicitation vote that ultimately amended Black Elk’s indenture to allow holders of Black Elk’s preferred equity — held by mostly Platinum affiliated entities and individuals — to receive proceeds on a priority basis.

Small and his co-conspirators (two of whom were already convicted of the same charges in July 2019) then personally took millions of dollars from the asset sale for their own uses.

The DOJ press release is here.

Former Congressman Charged with Multiple Fraud Schemes

Terrance John “TJ” Cox — former US Representative for California’s 21st congressional district — was charged with 15 counts of wire fraud, 11 counts of money laundering, one count of financial institution fraud, and one count of campaign contribution fraud.

According to the indictment, Cox allegedly perpetrated a variety of fraudulent schemes, including: creating unauthorized off-the-books bank accounts and diverting funds into those accounts through false pretenses; submitting fabricated bank statements and making false representations to a mortgage lender to receive mortgage loan funds; obtaining a $1.5 million construction loan based on false representations and fabricated documents; and orchestrating a scheme that resulted in over $25,000 in illegal straw or conduit donations to his campaign in 2017.

If convicted, Cox faces the possibility of lengthy prison sentences and hefty fines.

The DOJ press release is here, and the indictment is available here.

Man Sentenced to Prison for COVID-19 Relief Fraud

On Tuesday, August 16, the District Court for Connecticut sentenced Moustapha Diakhate to 42 months of imprisonment, followed by three years of supervised release for fraudulently receiving more than $4 million in COVID-19 relief funds under the CARES Act. 

According to the government, Diakhate provided two banks with false and fraudulent information in connection with Paycheck Protection Program loan applications for various small business entities in which he had ownership or management interests. Diakhate allegedly used a portion of the more than $4 million in funds he received for a variety of personal expenses, including purchases of multiple luxury cars.

The DOJ press release is here.

© 2022 ArentFox Schiff LLPNational Law Review, Volume XII, Number 231
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About this Author

D. Jacques Smith Attorney Litigation ArentFox Schiff Washington DC
Partner and Complex Litigation Practice Co-Leader

Jacques focuses his practice on government investigations and enforcement. Recognized as one of the top False Claims Act practitioners in the country, his clients largely encompass all branches of health care and life sciences. He has more than 30 years of experience handling jury, bench, and administrative trials in a variety of civil and criminal cases in state and federal courts throughout the country. Jacques excels at handling complex commercial disputes and internal investigations and responding to government inquiries. 

Jacques is...

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Randall A. Brater Litigation Attorney ArentFox Schiff Washington DC
Partner

Randy routinely litigates high-stakes matters in state and federal courts, including preliminary injunctions, motions practice, jury and bench trials, arbitrations, and mediation.

Randy often handles matters related to investigations and the False Claims Act, municipal bond finance, and trademark litigation. Randy also has represented agricultural chemical manufacturers in numerous data compensation disputes arising under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), environmental actions under CERCLA, employment, trade secret...

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Nadia Patel Business Litigation Lawyer ArentFox Schiff
Associate

Nadia regularly represents individuals and businesses involved in a variety of commercial litigation in state and federal court, including cases involving contract claims, Lanham Act violations, and litigation arising out of corporate transactions.  Recently, Nadia has represented foreign companies in civil litigation involving alleged violations of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act.  Nadia also represents employers in employment-related litigation, including matters involving violations of restrictive covenants, the Defend Trade Secret Act, and state trade secret...

202-775-5716
Apeksha Vora Civil and Commercial Litigation Attorney ArentFoxSchiff
ASSOCIATE

Apeksha has experience handling a broad range of regulatory and civil and commercial litigation matters.  In addition, Apeksha has helped advise clients through internal investigations and Bank Secrecy Act/anti-money laundering matters.

212-457-5420
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