Justia Banking Opinion Summaries

Kevin and Gretchen Higdon, residents of Missouri, opened a joint bank account in Missouri, which was later held by Equity Bank. M & I Marshall & Ilsley Bank obtained a judgment against Kevin in Missouri and sought to garnish the Higdons' account in Kansas to satisfy the judgment. The account was listed as "Joint (Right of Survivorship)" under Missouri law, which presumes a tenancy by the entirety for married couples, meaning the account could not be garnished for a judgment against only one spouse.The Johnson County District Court in Kansas denied the Higdons' motion to quash the garnishment, applying Kansas law, which does not recognize tenancy by the entirety. The court held that the account was a joint tenancy, allowing M & I Bank to garnish Kevin's half of the account. The Kansas Court of Appeals affirmed this decision, focusing on the procedural nature of garnishment under Kansas law.The Kansas Supreme Court reviewed the case and determined that the issue of account ownership was substantive, not procedural. The court applied the First Restatement of Conflict of Laws, which directs that the law of the state where the property interest was created (Missouri) should govern. Under Missouri law, the account was held as a tenancy by the entirety, and thus, M & I Bank could not garnish it for a judgment against Kevin alone.The Kansas Supreme Court reversed the decisions of the lower courts and remanded the case with directions to return the garnished funds to the Higdons, holding that Missouri law applied to the ownership of the account, preventing the garnishment. View "M & I Marshall & Ilsley Bank v. Higdon" on Justia Law

Thomas Petters orchestrated a Ponzi scheme through his company, Petters Company, Inc. (PCI), which collapsed in 2008. Following Petters' arrest and conviction, PCI was placed into receivership, and Douglas Kelley was appointed as the receiver. Kelley later filed for bankruptcy on behalf of PCI and was appointed as the bankruptcy trustee. As trustee, Kelley initiated an adversary proceeding against BMO Harris Bank, alleging that the bank aided and abetted the Ponzi scheme.The bankruptcy court and the district court both ruled that the equitable defense of in pari delicto, which prevents a plaintiff who has participated in wrongdoing from recovering damages, was unavailable due to PCI's receivership status. The case proceeded to trial, and a jury awarded Kelley over $500 million in damages, finding BMO liable for aiding and abetting a breach of fiduciary duty. BMO appealed, challenging the availability of the in pari delicto defense, among other issues.The United States Court of Appeals for the Eighth Circuit reviewed the case and concluded that the doctrine of in pari delicto barred Kelley’s action against BMO. The court reasoned that while a receiver might not be bound by the fraudulent acts of a corporation's officers under Minnesota law, a bankruptcy trustee stands in the shoes of the debtor and is subject to any defenses that could have been raised against the debtor. Since PCI was a wrongdoer, the defense of in pari delicto was available to BMO in the adversary proceeding. The court reversed the district court's judgment and remanded the case with directions to enter judgment in favor of BMO. The cross-appeal was dismissed as moot. View "Kelley v. BMO Harris Bank N.A." on Justia Law

The case involves Izzat and Tarik Freitekh, who were convicted of various offenses related to a fraudulent Paycheck Protection Program (PPP) loan scheme. They received $1.75 million in PPP loan funds through false representations and fabricated documents. Izzat owned several businesses, and with Tarik's help, they submitted fraudulent loan applications. The funds were deposited into accounts controlled by Izzat, and he distributed some of the money to family members under the guise of payroll.The United States District Court for the Western District of North Carolina initially reviewed the case. Both defendants were indicted for bank fraud, conspiracy to commit wire fraud, and other related charges. During the trial, the court admitted testimony from their former attorneys, who had received and submitted falsified documents to the government. The jury found Izzat guilty of conspiracy to commit money laundering, money laundering, and making false statements, while Tarik was found guilty of conspiracy to commit wire fraud, bank fraud, conspiracy to commit money laundering, money laundering, and falsifying material facts.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court affirmed the district court's decisions, holding that sufficient evidence supported the convictions. The court found that the circumstantial evidence, including emails and checks, was enough to prove Izzat's involvement in the money laundering conspiracy. The court also upheld the district court's reliance on acquitted conduct to calculate the sentencing enhancements, noting that the evidence presented at trial proved Izzat's participation in the fraudulent scheme by a preponderance of the evidence. The court also found no error in the district court's application of the "intended loss" definition in the sentencing guidelines. Tarik's arguments regarding the calculation of the loss amount and the application of the sophisticated means enhancement were also rejected. The court concluded that the district court had properly considered the relevant sentencing factors and affirmed the sentences imposed. View "United States v. Freitekh" on Justia Law

A former employee of Credit Suisse, John Doe, filed a qui tam action under the False Claims Act (FCA) alleging that the bank failed to disclose ongoing criminal conduct to the United States, thereby avoiding additional penalties. This followed Credit Suisse's 2014 guilty plea to conspiracy charges for aiding U.S. taxpayers in filing false tax returns, which included a $1.3 billion fine. Doe claimed that Credit Suisse continued its illegal activities post-plea, thus defrauding the government.The United States District Court for the Eastern District of Virginia granted the government's motion to dismiss the case. The government argued that Doe's allegations did not state a valid claim under the FCA and that continuing the litigation would strain resources and interfere with ongoing obligations under the plea agreement. The district court dismissed the action without holding an in-person hearing, relying instead on written submissions from both parties.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court held that the "hearing" requirement under 31 U.S.C. § 3730(c)(2)(A) of the FCA can be satisfied through written submissions and does not necessitate a formal, in-person hearing. The court found that Doe did not present a colorable claim that his constitutional rights were violated by the dismissal. The court emphasized that the government has broad discretion to dismiss qui tam actions and that the district court properly considered the government's valid reasons for dismissal, including resource conservation and the protection of privileged information. The Fourth Circuit concluded that the district court's dismissal was appropriate and affirmed the judgment. View "United States ex rel. Doe v. Credit Suisse AG" on Justia Law

Juan Jose Paramo, the defendant-appellant, is involved in a legal dispute with Banco Mercantil de Norte, S.A. and Arrendadora y Factor Banorte, S.A. de C.V. (the Banorte Parties). The Banorte Parties allege that Paramo committed large-scale fraud in Mexico and fled to the United States. They are pursuing a civil lawsuit in Mexico and sought discovery in the U.S. under 28 U.S.C. § 1782 to locate and seize Paramo’s assets. The Banorte Parties filed an ex parte request for discovery assistance, which the district court granted, authorizing subpoenas for Paramo and two other individuals.The United States District Court for the Southern District of Texas granted the Banorte Parties' petition and authorized the subpoenas. Paramo filed a motion to quash the subpoenas, arguing that the discovery request was overly broad and that the Intel factors favored him. The district court denied Paramo’s motion in a brief order without waiting for his reply or holding a hearing. Paramo appealed the decision, arguing that the district court failed to provide reasoning for its denial and violated local rules by not allowing him to file a reply.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court abused its discretion by failing to provide any reasoning for its decision to deny Paramo’s motion to quash. The Fifth Circuit emphasized that district courts must explain their decisions when granting or denying motions to quash § 1782 subpoenas to allow for effective appellate review. Consequently, the Fifth Circuit vacated the district court’s order and remanded the case for further proceedings, instructing the lower court to provide a reasoned decision. The court did not address the substantive arguments regarding the Intel factors or the scope of the discovery request. View "Banco Mercantil de Norte, S.A. v. Paramo" on Justia Law

Timberly Hughes, a U.S. citizen, failed to report her foreign bank accounts for the years 2010 through 2013, as required under the Bank Secrecy Act of 1970. Hughes owned two companies in New Zealand and had financial interests in their accounts. The United States assessed penalties against her for willful failure to file the required Reports of Foreign Bank and Financial Accounts (FBARs) for 2012 and 2013, totaling $678,899. Hughes did not pay, leading the United States to file suit in federal court.The United States District Court for the Northern District of California held a bench trial and found that Hughes willfully failed to file FBARs for 2012 and 2013 but not for 2010 and 2011. The court concluded that "willfulness" for civil FBAR penalties could be shown through recklessness or willful blindness, following the Supreme Court's reasoning in Safeco Insurance Co. of America v. Burr. The court entered a final judgment against Hughes for $238,125.19 in substantive penalties but denied the United States' request for prejudgment interest and late payment penalties.The United States Court of Appeals for the Ninth Circuit reviewed the case and affirmed the district court's decision. The Ninth Circuit agreed that "willfulness" for civil FBAR penalties includes both knowing and reckless violations, aligning with the reasoning in Safeco and the consensus of other circuits. The court found that Hughes's failure to file was willful for 2012 and 2013, as she had acknowledged the requirement on her tax returns but failed to comply. The Ninth Circuit upheld the district court's judgment and rejected Hughes's argument that subjective intent was necessary to establish willfulness. View "USA V. HUGHES" on Justia Law

William Lyons opened a Home Equity Line of Credit (HELOC) account with National City Bank in 2005, which was later acquired by PNC Bank. PNC withdrew funds from Lyons' deposit accounts to offset outstanding HELOC payments without prior notification. Lyons contested these withdrawals, claiming they were unauthorized. PNC responded, asserting their right to make the withdrawals. Lyons then sued for economic and statutory damages, as well as emotional distress.The case was initially heard in the United States District Court for the District of Maryland. PNC moved to compel arbitration on the Truth in Lending Act (TILA) claim, which the district court partially granted. Both parties appealed, and the United States Court of Appeals for the Fourth Circuit held that the Dodd-Frank Act prohibits arbitration of claims related to residential mortgage loans. The case was remanded to the district court, which ruled in favor of PNC on both the TILA and Real Estate Settlement Practices Act (RESPA) claims. The district court held that TILA’s offset provision does not apply to HELOCs and that the CFPB had the authority to exempt HELOCs from RESPA’s requirements.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court held that TILA’s offset provision does apply to HELOCs, reversing the district court’s decision on the TILA claim. The court found that the term "credit card plan" includes HELOCs when accessed via a credit card. However, the court affirmed the district court’s decision on the RESPA claim, agreeing that the CFPB has the authority to exempt HELOCs from RESPA’s definition of “federally related mortgage loans.” The case was reversed and remanded in part and affirmed in part. View "Lyons v. PNC Bank, N.A." on Justia Law

In 2019, Tamika Miller filed a qui tam action under the False Claims Act (FCA) against Citibank, alleging that the bank violated 2015 consent orders by hiding failures in its management of third-party risks to avoid paying regulatory fines. Miller claimed that Citibank altered audit reports to downplay compliance violations, thereby avoiding penalties. The United States declined to intervene in June 2020. In October 2020, Citibank entered into a new consent order with the Office of the Comptroller of the Currency (OCC) and paid a $400 million civil penalty. Miller sought a share of this penalty, arguing it was an alternate remedy for her qui tam claim.The United States District Court for the Southern District of New York granted Citibank's motion to dismiss Miller's complaint for failure to state a claim and denied her motion for a share of the $400 million penalty. The court found that Miller failed to allege an "obligation" to pay the government as required by the FCA and did not meet the particularity requirement of Federal Rule of Civil Procedure 9(b). The court also denied Miller's request for leave to amend her complaint, concluding that the deficiencies could not be cured by amendment.The United States Court of Appeals for the Second Circuit affirmed the district court's decision. The appellate court held that Miller failed to state a reverse false claim because she did not allege an established duty for Citibank to pay the government. The court also found that Miller's complaint did not meet the particularity requirement of Rule 9(b) as it failed to identify specific false statements or reports. Consequently, Miller was not entitled to a share of the $400 million penalty, and the district court did not err in denying her leave to amend her complaint. View "Miller v. United States, Citibank, N.A." on Justia Law

Fesnel Lafortune, a Haitian national, entered the U.S. on a B-2 visitor visa in 2008 and overstayed. In 2019, he pleaded guilty to conspiracy to commit bank fraud and aggravated identity theft, receiving a combined prison sentence of 31 months. Following his convictions, the Department of Homeland Security (DHS) charged him with removability due to his lack of lawful status and his conviction for an aggravated felony involving fraud exceeding $10,000.The Immigration Judge (IJ) found Lafortune removable and denied his claims for asylum, withholding of removal, and protection under the Convention Against Torture (CAT). Lafortune, appearing pro se, requested continuances to find counsel, which were denied. He admitted to the allegations and expressed fear of returning to Haiti. The IJ ruled him ineligible for asylum and other protections, citing his conviction as a particularly serious crime. Lafortune appealed to the Board of Immigration Appeals (BIA), which remanded the case for him to secure counsel. On remand, the IJ again denied his requests for continuances and upheld the original decision. Lafortune, now with counsel, appealed again to the BIA, which dismissed his appeal.The United States Court of Appeals for the First Circuit reviewed the case. The court upheld the BIA's decision, agreeing that Lafortune's conviction for conspiracy to commit bank fraud constituted a particularly serious crime, making him ineligible for withholding of removal. The court also found no error in the IJ's and BIA's handling of Lafortune's CAT claim, concluding that he failed to demonstrate a particularized risk of torture by or with the acquiescence of Haitian officials. The petition for review was denied. View "Lafortune v. Garland" on Justia Law

Brian Cook entered a bank in Roseville, Illinois, wearing a disguise and armed with what appeared to be a gun, later identified as an air pistol. He threatened two tellers, directing one to retrieve money from the vault and instructing the other to stay put. Cook fled with a bag of cash but was quickly apprehended by law enforcement, who found the stolen money and the air pistol in his vehicle. Cook pleaded guilty to bank robbery under 18 U.S.C. § 2113(a).The United States District Court for the Central District of Illinois sentenced Cook to 144 months of imprisonment and three years of supervised release. The court applied a four-level enhancement under § 2B3.1(b)(2)(D) of the United States Sentencing Guidelines, finding that Cook had "otherwise used" the gun during the robbery. Cook contested this, arguing that he had only "brandished" the gun, which would warrant a lesser, three-level enhancement under § 2B3.1(b)(2)(E). The district court also considered Cook's extensive criminal history and his deliberate targeting of a small-town bank in its sentencing decision.The United States Court of Appeals for the Seventh Circuit reviewed the case and affirmed the district court's judgment. The appellate court found no procedural error in the application of the four-level enhancement, agreeing that Cook's actions constituted "otherwise using" the gun. The court also upheld the above-Guidelines sentence, noting that the district court had provided a thorough explanation for its decision, including Cook's extensive criminal history and the need for deterrence and public protection. The appellate court concluded that the sentence was neither procedurally erroneous nor substantively unreasonable. View "USA v. Cook" on Justia Law