United States v. Cohen

Decision Date10 September 2015
Docket NumberCRIMINAL NO.: WDQ-14-0310
CourtU.S. District Court — District of Maryland

On June 5, 2015, Jeffrey Brian Cohen pled guilty to wire fraud,1 aggravated identity theft,2 false statements to an insurance regulator,3 and obstructing justice.4 ECF No. 385 at 1 (plea agreement). Pending is Cohen's motion to withdraw the plea. ECF No. 480. On September 8, 2015, the Court held a hearing and received evidence on the voluntariness of Cohen's plea. ECF No. 483. For the following reasons, Cohen's motion was denied.

I. Background5
A. Overview of the Crime

Cohen was the President and Chairman of the Board of Indemnity Insurance Corporation RRG6 ("Indemnity"), a Delaware corporation located at Sparks, Maryland. ECF No. 385 at 11. Indemnity provided general liability insurance, liquor liability insurance, and excess liability insurance coverage to persons and companies in the entertainment industry. Id. From 2008 to 2012, Indemnity insured more than 3,000 policyholders and collected more than $100 million in premiums. Id. Indemnity was regulated by the Delaware Insurance Commissioner ("Commissioner"). Id.

A.M. Best is an independent insurance ratings agency that rated insurance companies and risk retention groups. Id. In April 2008, A.M. Best gave Indemnity an "A-" rating, contingent upon a $1 million capital infusion. Id. at 11-12. Cohen provided A.M. Best with a fake document purporting to establish the capital infusion. Id. at 12. In 2009, Cohen asked A.M. Best to increase his financial size category, relying on a purported $47 million bank balance at BNP Paribas, which Cohen established with a fake letter of credit. Id. In December 2009, A.M. Best placed Indemnity under review. Id. Cohen gave A.M. Best fake documents purporting to show that he had provided Indemnity a $10 million infusion of capital. Id. Cohen listed the $10 million on Indemnity's ledger as a capital contribution and created fake confirmations for Indemnity's bank accounts. Id.

Marcum LLP ("Marcum") and BDO USA LLP ("BDO") are independent accounting firms that audited Indemnity. Id. From 2008 to 2013, Cohen sent several false and fraudulent documents to Marcum and BDO for their audit of Indemnity's financial statements. Id.

First Insurance Funding ("First Insurance") is an Illinois premium financing company that provided loans to persons or companies who sought to finance the costs of insurance premiums. Id. Under premium financing agreements, First Insurance paid companies--such as Indemnity--insurance premiums, and persons or companies would repay First Insurance the cost of insurance premiums plus interest. Id. Cohen established a "mini Ponzi thing" under which he created fake financing applications for nonexistent policyholders, and used the premiums paid by First Insurance as operating cash for Indemnity. Id. As part of the scheme, Cohen created a fake business manager for the financing applications called Monahan & O'Brien ("M&O"); Cohen used the identifying information of Indemnity's former attorney to create M&O. Id. In January 2010, Cohen emailed First Insurance a false and fraudulent premium financial application purportedly signed by "T.M." Id. at 13.

SCOR Reinsurance Company ("SCOR") is a French financial services company that sold reinsurance policies. Id. at 14. U.S. RE Corporation ("U.S. RE") is a New York corporation that brokered reinsurance policies issued by SCOR to companies, such as Indemnity. Id. The Light Group LLC ("The Light Group") managed several Las Vegas nightclubs and lounges. Id. The Light Group was required to buy insurance from companies meeting certain liquidity and size requirements. Id. Cohen made false representations to the Light Group and other policyholders about the reinsurance available to Indemnity. Id. Cohen altered SCOR and U.S. RE reinsurance documents to present fake reinsurance coverage to The Light Group and others. Id.

In 2012, the Commissioner began investigating Indemnity's financial stability. ECF No. 324 at 2. In January 2013, Cohen sent a letter to the Commissioner in which he falsely asserted that Indemnity had $5.1 million in unencumbered cash on deposit at Susquehanna Bank. ECF No. 385 at 13. In April 2013, Cohen sent a fax to the Commissioner falsely stating that Susquehanna Bank had confirmed that Indemnity had $5.1 million in cash on deposit at the bank. Id. Cohen had used the identity of a Susquehanna Bank employee, "N.B.," to create fake bank confirmations "without her permission and with the knowledge that she was a real person whose identity he was using for the fraud." Id.

In May 2013, the Commissioner obtained a seizure order from the Delaware Court of Chancery authorizing the regulatory takeover of Indemnity. ECF No. 324 at 3. In June 2013, the Delaware Insurance Commissioner initiated civil proceedings against Cohen-controlled companies, including Indemnity. ECF No. 385 at 14. In July 2013, after examining Indemnity under the seizure order, the Commissioner filed a petition to liquidate Indemnity "in light of (i) acts of fraud by Cohen and (ii) Indemnity's unsound financial condition." ECF No. 324 at 3. On August 5, 2013, Cohen resigned as Indemnity's Chairman of the Board. Id.

In October 2013, Attorney#1 and Attorney#2 referred Cohen's criminal offenses to the U.S. Attorney for the District of Maryland. ECF No. 385 at 14. In February 2014, Cohen threatened Attorney#2, stating, "Now I'm coming after you. You're next." Id. at 14-15.

B. Procedural History

On November 25, 2014 the grand jury returned a second superseding indictment that charged Cohen with fifteen counts of wire fraud under 18 U.S.C. § 1343, five counts of aggravated identity theft under 18 U.S.C. § 1028A, two counts of money laundering under 18 U.S.C. § 1957, five counts of making false statements to an insurance regulator under 18 U.S.C. § 1033(a), and four counts of obstructing justice under 18 U.S.C. §§ 1512, 1513. ECF No. 73. On December 2, 2014, a third superseding indictment charged Cohen with the same counts and made minor corrections to the second superseding indictment. ECF Nos. 78, 80.

On June 1, 2015, Cohen's trial began. ECF No. 381. On June 5, 2015, Cohen pled guilty to one count each of wire fraud, aggravated identity theft, false statements to an insurance regulator, and obstructing justice. ECF Nos. 385, 389.7 Through standby counsel, William B. Purpura, Esq., Cohen negotiated the plea with the government attorneys prosecuting the case. ECF No. 480 at 1. Purpura reviewed the plea agreement with Cohen in a room on the Sixth Floor of the U.S. Courthouse. ECF No. 517 at 2.8 When the parties assembled in Courtroom 3A for the plea colloquy, Cohen made additional requests, discussed below.

1. Cohen's Version of Events

At the hearing, Purpura testified that Cohen told him that he would only plead guilty if his wife, Crystal Cohen, was "made whole."9 Hr'g. When the parties met in Courtroom 3A for the plea colloquy before The Honorable J. Frederick Motz, Purpura told Cohen that the government had agreed to Cohen's last request that it return all of Mrs. Cohen's jewelry. Id. Purpura saw Cohen write something about a bank account on his copy of the final plea agreement; until then, neither Cohen's nor Mrs. Cohen's bank accounts were the subject of plea negotiations. Id. Purpura asked one of the prosecutors, Harry Gruber, Esq., about the bank accounts. Id. Gruber asked what account to which Purpura was referring; Purpura did not know, and asked Cohen to identify the account. Id. Cohen said something about $20,000 in relation to the accounts. Id. To the best of Purpura's recollection, Cohen also asked whether there were any other accounts jointly held by Cohen and Mrs. Cohen, or held in Mrs. Cohen's name alone, which had been seized. Id. Gruber responded "no," then hesitated and said he would check with another agent who then looked up whether an account containing about $20,000 had been seized. Id. Gruber agreed to return the funds seized from a joint M&T bank account containing about $20,000 and stated that no other accounts had been seized.10 Id. At no time did Cohen mention a Fidelity bank account by institution name or seizure number. Id. Purpura believed that Gruber and his co-counsel Joyce McDonald, Esq., had acted with honesty and diligence, and simply made a mistake when they overlooked the seizure of Mrs. Cohen's Fidelity account. Id.

Cohen testified that when he reviewed the final plea agreement in the courtroom, he said "there [are] no bank accounts in here." Id. When Gruber had asked "what bank account," Cohen stated "my wife's bank accounts." Id. According to Cohen, Gruber stated that the government had not seized Mrs. Cohen's bank accounts. Id. When Gruber asked Cohen to identify a bank account, Cohen responded, the "joint M&T bank account" that had a recent $22,000 deposit. Id. Gruber then conferred with another agent and agreed to return the funds in the joint M&T bank account. Id. Because Gruber had stated that none of Mrs. Cohen's accounts had been seized, Cohen did not ask about the Fidelity account; had he known about that account, he would not have pled guilty. Id.11

2. The Government's Version of Events

Gruber testified that, to avoid later confusion, he had made clear during plea negotiations that he wanted the plea agreement to include seizure numbers for property that the government would return to Mrs. Cohen. Id. When the parties met in Courtroom 3A, Gruber believed that the plea agreement was final. Id. Purpura approached Gruber and told him that Cohen had an additional request about bank accounts. Id. Purpura asked Cohen to identify the bank account, then told Gruber and McDonald "Crystal's bank account." Id. Gruber again asked "what accounts, or what account?" Id. Purpura referred to an account in Mrs. Cohen's name that had about $20,000 in it. Id....

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