Opinion ID: 2960062
Heading Depth: 2
Heading Rank: 2

Heading: Schemes Alleged

Text: The Indictment sets forth two schemes. Counts One through Eight allege the “First Scheme,” which includes charges of: conspiracy to commit securities fraud and wire fraud in violation of 18 U.S.C. § 371; securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, 17 C.F.R. § 240.10b-5, and 18 U.S.C. § 2; and wire fraud in violation of 18 U.S.C. §§ 1343, 1346, and 2. Counts Nine through Thirteen allege the “Second Scheme,” which includes charges of: 1 In a companion summary order, we address and reject defendants’ remaining claims concerning the sufficiency of evidence produced at trial; the erroneous introduction of a coconspirator’s guilty plea allocution; the exclusion of certain statements made between Wexler and another co-conspirator; attacks on defendant Thomas M. Rittweger’s sentence; Rittweger’s ineffective assistance of counsel claim; and numerous other challenges submitted in Rittweger’s pro se supplemental brief. 3 conspiracy to commit securities fraud, wire fraud, and commercial bribery in violation of 18 U.S.C. § 371; and using facilities of interstate commerce to carry on and facilitate commercial bribery in violation of 18 U.S.C. §§ 1952(a)(3) and 2. As part of the First Scheme, the Indictment alleges that from about 1996 through about 1999, Rittweger and Brandon, together with Blech and other co-conspirators, participated in a scheme to defraud customers of Credit Bancorp, Ltd. (“CBL”)—a group of related United States and foreign business organizations that purported to provide “financial engineering” and investment services—of at least $210,000,000 by fraudulently inducing them to invest cash, securities, and other assets in two CBL investment programs: the “CBL Insured Credit Facility” and the “CBL Insured Securities Strategy.” The customers did so in the expectation of receiving dividend payments and loans with favorable terms. The Indictment asserts that CBL was actually a Ponzi scheme, in which the proceeds from investments in the programs were paid to earlier investors to create the false appearance that the investments were profitable, thereby inducing additional customers to invest assets with CBL. The Indictment charges that in furtherance of the First Scheme, Rittweger and Brandon, together with Blech and other co-conspirators, made and caused others to make false and misleading representations to prospective customers. It further alleges that Rittweger, Brandon, and Blech falsely represented that Brandon would serve as a trustee on behalf of those customers who invested in the CBL Insured Credit Facility and would hold the invested assets in custodial accounts under his control. According to the Indictment, Rittweger, Brandon, and Blech knew that Brandon had neither control over the accounts into which the CBL customer assets were invested, nor the ability to fulfill his duties as trustee. Rittweger and Blech also allegedly 4 misrepresented that assets invested in the CBL Insured Securities Strategy would be placed in mutual funds and other financial instruments, when they knew that a substantial portion of the assets were used to pay for unauthorized business and personal expenses instead. The Second Scheme involves Rittweger, Wexler, and co-conspirator DeHaven, who was an officer of Mitsui Trust Company (“Mitsui”), a Japanese financial institution. DeHaven worked in Mitsui’s New York office and was responsible for Mitsui’s participation in securities lending transactions. The Indictment alleges that DeHaven owed fiduciary and other duties of trust and honest services to Mitsui. The Indictment asserts that Wexler, a personal friend of DeHaven, referred potential customers to CBL in return for payments from CBL, and also managed a foreign exchange trading business affiliated with CBL. With respect to the Second Scheme, the Indictment further alleges that from about 1997 through 1999, Rittweger, DeHaven, and Wexler, together with Blech and other co-conspirators, participated in a scheme to defraud customers by inducing them to invest cash, securities, and other assets in the CBL Insured Credit Facility. In furtherance of this scheme, the conspirators allegedly made and caused others to make numerous false and misleading representations, including the claim that Mitsui had invested securities worth approximately $50,000,000 or more with CBL, when they knew that Mitsui had made no such investment.