In the previous blog post in this series we talked about the common COCCA charges frequently used in marijuana and white collar criminal cases. In this post we explore the offenses used as “predicate offenses” by prosecutors in order to establish “a pattern of racketeering activity.” Frequently, white collar crimes such as securities fraud, theft, money laundering, and distribution of controlled substances are used to establish COCCA charges.
A conviction for a COCCA charge requires the prosecution to prove beyond a reasonable doubt that the defendant engaged in a pattern of racketeering activity. A pattern of racketeering activity means committing two or more “predicate acts." Colorado Revised Statute section 18-17-103(5) includes a number of qualifying crimes. The following are some of the more common “predicate acts” used to establish a pattern of racketeering activity.
Arguably the most common white collar crime used to establish COCCA charges against corporate executives and financial brokers is securities fraud. In Colorado, it is unlawful for any person, in connection with a transaction involving a security, to make any untrue statement of a material fact. It is also illegal to merely omit to state a fact if, under the circumstances, failing to state the fact makes the sale misleading.
A “security” includes any note, stock, investment contract, or transferable share in a company. This definition encompasses transferable ownership interests in a company, even if the company is not publicly listed on a security exchange.
What this means is that it is illegal to lie or to fail to disclose important information when selling stocks, or getting a person to invest in your company. Even if COCCA itself isn’t charged, securities fraud alone can add up to significant prison time. Companies and executives should seek legal counsel in drafting proxy materials and investment brochures so as to avoid inadvertently making material misstatements and omissions to prospective investors.
Theft is commonly charged alongside securities fraud in white collar criminal cases. A person commits theft when he knowingly obtains, retains, or exercises control over a thing of value of another without authorization and has the specific intent to permanently deprive the other person of the use or benefit of the thing of value. The typical white collar theft case for purposes of COCCA is where an investment broker promises to place the money they get from investors into separate trust accounts but instead use the money for their own benefit. This conduct can give rise to securities fraud charges, theft charges, and then can be used to establish COCCA charges.
The next common predicate offense used in white collar COCCA cases is money laundering. Under Colorado law, a person commits money laundering if he 1) engages or attempts to engage in a transaction 2) with intent to promote the commission of a criminal offense, or with knowledge or a belief that the money represents the proceeds of a criminal offense, 3) in an attempt to conceal, disguise the nature or source of the money, or avoid a transaction reporting requirement under federal law.
Usually, money laundering charges are tied with some other charge such as securities fraud, theft, or distribution of a controlled substance where the person uses the “illegally obtained money” to reinvest in their company and thus conceal the source of the money. Surprisingly, reinvestment of one penny of illegal funds into an organization can give rise to a felony money laundering charge.
One common money laundering scenario is where a marijuana dispensary worker is caught selling some of the company’s product on the side. If any of that money gets back into the organization in the form of purchasing equipment, marketing materials, or inventory, the company and its executives could be criminally charged. Companies such as recreational marijuana dispensaries should seek legal counsel to ensure that their employees are complying with local and state laws.
Distribution of a Controlled Substance
This is the most common crime used as a predicate offense for COCCA charges against members of the marijuana industry. It is illegal to knowingly manufacture, dispense, sell, or distribute a controlled substance in the state of Colorado. Selling marijuana in any way not specifically authorized by statute or in violation of an organization’s permit falls under this offense.
Common scenarios include one partner at an otherwise lawful marijuana dispensary making large marijuana sales across state lines or in violation of the business’s license. Other partners in the business can be roped into the bad acts of one person and can be charged under a complicity or conspiracy theory. These charges never exist alone and, reinvestment of money gained through illegal marijuana sales can give rise to money laundering and COCCA charges. Business partners in dispensaries should seek counsel to ensure that the activities of their partners do not get them implicated in a large scale marijuana bust.
COCCA charges are frequently predicated on the crimes discussed above. Any two of these offenses within 10 years of each other can give rise to a COCCA charge. As one could imagine, the same conduct may be used to convict a person on securities fraud, theft, money laundering, and COCCA. The sentences for these convictions run consecutively, meaning the prison time for one doesn’t start until the other is finished. That is why white collar cases have had prison sentences of 100 years or more. This can be avoided through establishing compliance programs at your organization and seeking the help of an experienced trial attorney if and when grand jury subpoenas are issued.
Disclaimer: The information in this blog is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this blog should be construed as legal advice from The Eichner Law Firm or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this blog should act or refrain from acting on the basis of any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.