White Collar & Criminal Law News

Convicted Ponzi Schemer Loses Bid to Challenge Sentence

Jan. 31, 2019, 8:04 PM

A Minnesota man convicted in a $193 million “partial” Ponzi scheme failed in his bid to challenge his 20-year sentence based on ineffective assistance of counsel.

Patrick Joseph Kiley’s challenge to his conviction raised potential conflicts of interest by his attorney, Henry Masif Mahmoud. But those conflicts didn’t have an adverse effect on Mahmoud’s representation of Kiley, the U.S. Court of Appeals for the Eighth Circuit held.

Kiley, along with Trevor Cook, ran a currency program that the court characterized as a partial Ponzi scheme. The two conspired to steal more than $193 million from investors, prosecutors alleged.

A bank was recently cleared of civil liability to recover funds for victims of the scheme.

Kiley wired $100,000 in stolen funds to Mahmoud as a retainer for his representation after the conspiracy began to fall apart, according to the court. The transfer later became the basis for a count of money laundering against Kiley, on which he was convicted.

Mahmoud also previously represented two people who testified at trial.

Kiley argued another attorney would have cross-examined one of those witnesses, while Mahmoud did not. But Mahmoud credibly explained that the cross-examination would have harmed Kiley’s case, the court noted.

That decision was reasonable and didn’t adversely affect Kiley, the Eighth Circuit said.

Kiley also argued Mahmoud’s very presence at trial was a problem after Mahmoud was allegedly implicated in money laundering.

But what the jury heard about Mahmoud receiving stolen funds “carried no hint of illegality absent Mahmoud’s knowledge of the nature of the funds at the time he received them,” the panel said. And the district court found there wasn’t enough evidence to infer he knew or should have known, the appeals court said.

Mahmoud also had innocent reasons for corresponding with an investor, one of those he previously represented, the court said. The emails didn’t show Mahmoud was implicated in the conspiracy, it said.

The case is Kiley v. United States, 2019 BL 31016, 8th Cir., No. 17-2428, 1/31/19.

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; C. Reilly Larson at rlarson@bloomberglaw.com

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