Justia Banking Opinion Summaries

Between 2004 and 2008, Brown ran an elaborate scheme that tricked lenders into issuing fraudulent mortgage loans in Chicago and Las Vegas. Brown recruited or directed dozens of individuals: lawyers, accountants, loan officers, bank employees, realtors, home builders, and nominee buyers. Of his accomplices, 32 people were criminally charged. The Chicago scheme resulted in about 150 fraudulent loans, totaling more than $95 million in proceeds from victim lenders. The Las Vegas scheme resulted in approximately 33 fraudulent loans totaling about $16 million. Brown entered guilty pleas and was sentenced to 216 months’ imprisonment for the Las Vegas scheme and 240 months’ imprisonment for the Chicago scheme, to run concurrently. The district court also imposed a restitution amount of more than $32.2 million. The Seventh Circuit affirmed Brown’s sentence, rejecting a challenge to the loss calculation. The court remanded the 66-month sentence and $7.1 restitution order against another participant in the Chicago scheme because the court incorrectly determined the number of victims. View "United States v. Love" on Justia Law

Valerio, a citizen of Costa Rica, entered the U.S. illegally in 1991. Her companion paid $500 to obtain a birth certificate and Social Security card in the name of Rosa Hernandez, a person living in Puerto Rico. For about 12 years, Valerio used Hernandez's identity to hold a variety of jobs, pay taxes, open lines of credit, purchase cars, obtain a drivers' license, and take a loan to purchase a home. She obtained various welfare benefits for herself and her family under her real name, withholding information regarding income and assets she held under Hernandez's name. She used the Hernandez identity to vouch for herself as Valerio. When the real Hernandez discovered the situation, police apprehended Valerio, searched her apartment, and found numerous documents relating to her true identity and her assumed Hernandez identity. She was convicted of three counts of mail fraud, 18 U.S.C. 1341 and aggravated identity theft, 18 U.S.C. 1028A. The First Circuit affirmed, rejecting a challenge to sufficiency of the evidence and holding that Valerio was not prejudiced by the performance of her trial attorney.View "United States v. Valerio" on Justia Law

In 2002 Bell established mutual funds and raised about $2.5 billion for investment. Most of the firms to which the funds routed money were controlled by Petters. He was running a Ponzi scheme. There was no inventory. New investments paid older debts, with some money siphoned off for personal use. When Petters was caught in 2008, the funds collapsed; about 60% of the money was gone. The funds' bankruptcy trustee filed suit against the funds' auditor, alleging negligence. The district court dismissed without deciding whether the auditor had acted competently, invoking the doctrine of in pari delicto, based on Bell's knowledge of the scheme. The Seventh Circuit vacated, noting that Bell was not stealing funds and that the extent of his knowledge cannot be determined at this stage. An allegation that Bell was negligent but not criminally culpable in 2006 and 2007 makes the claim against the auditor sufficient. View "Peterson v. McGladrey & Pullen, LLP" on Justia Law

In 2008, defendant was in the U.S. illegally and, at the direction of another, purchased a house for the purpose of obtaining multiple home equity lines of credit. He submitted loan applications that contained false statements about citizenship, employment, and intent to reside in the house, and concealed other loan applications He pled guilty to engaging in a scheme to defraud financial institutions and to obtain monies and funds owned by and under the custody and control of the financial institutions by means of materially false and fraudulent pretenses, representations, promises, and omission, 18 U.S.C. 1344. He was sentenced to 51 months and ordered to pay $337,250 in restitution. The Seventh Circuit affirmed the restitution order, rejecting an argument that he could not be ordered to pay restitution for conduct to which he did not plead guilty. The transactions to which he pled guilty resulted in no actual loss because he was arrested before the loans were funded. The court noted that his plea declaration described the scheme as a whole and the ultimate loss to the lender. View "United States v. Dong" on Justia Law

Defendant, a businessman, was convicted on 10 counts of bank fraud (18 U.S.C. 1344) involving creation of 10 fraudulent entries on the books of a small bank in Benton, Tennessee. At trial, the government offered the theory that defendant and the bank's president jointly created the phony entries in an effort to disguise earlier, troubled loans to defendant's business. The Sixth Circuit reversed, finding that the evidence was insufficient to prove guilt beyond a reasonable doubt. The court improperly excluded evidence that the bank president had, unassisted, previously engaged in a large number of identical frauds. The prosecutor suggested to the jury that acquittal would deliver a financial windfall to defendant. The government offered no direct evidence and insufficient circumstantial evidence to show that defendant knew about or participated in the bank president's fraud, a fraud that the bank president had independent reasons for creating.

Defendant, an immigrant, cleaned houses. She formed a cleaning service in 1992. Defendant would deposit customers' checks in the business checking account, keep some money as a fee, and withdraw the remaining amount to pay individual cleaners. The bank informed her of the requirement (31 C.F.R. 103.22(b)(1)) that it document and report transactions involving withdrawals of cash greater than $10,000. After being informed of the requirement, defendant would often withdraw more than $10,000 over the course of two days, but less than 24 hours; she withdrew amounts over $9,000 and less than $10,000 on 244 occasions in about six years. She was convicted of 23 counts of structuring transactions to avoid bank reporting, 31 U.S.C. 5324(a)(3). The court gave an "ostrich" instruction, concerning defendant's knowledge. The jury returned a special verdict subjecting $279,500 to forfeiture; the court imposed a sentence of three years of probation as well as an additional judgment of $4,800. The Seventh Circuit affirmed, finding no constitutional violation in weighing the forfeiture against the severity of the crime. Any error in giving the ostrich instruction was harmless.

The United States appealed the district court's dismissal of a superseding indictment because it did not state a crime against defendant for knowingly and willfully making false statements to a financial institution insured by the FDIC and knowingly making false statements for the purpose of influencing the action of a bank insured by the FDIC. Defendant made the allegedly false statements on loan applications to refinance his residence where he failed to list an illegal campaign loan under "outstanding debts." The court agreed with the district court's conclusion that defendant's statements were literally true because the illegal loan was an absolute nullity and consequently was not a debt that ever existed.

When Rita Fix's son and daughter-in-law, Jeff and Marie, secured a loan from the First State Bank of Roscoe by obtaining a warranty deed for the property, the Bank assured Fix she could retain possession of the house. After Jeff and Marie conveyed the house and property to the Bank, the Bank sold the property and sought to remove Fix from the house. Fix sued the Bank for, inter alia, intentional infliction of emotional distress (IIED). Meanwhile, Fix, Jeff, and Marie were indicted on multiple criminal counts. The State attorney who brought the charges and who represented the Bank civilly offered to dismiss the criminal charges against Fix if she would deed the house back to the Bank. Fix then amended her complaint to include a claim of abuse of process against the Bank. The trial court granted summary judgment against Fix on her IIED claim. A jury then returned a verdict finding the Bank liable for abuse of process but awarded no damages to Fix. The Supreme Court reversed on the abuse of process claim, holding that the trial court provided the jury with the incorrect legal standard for the recovery of emotional damages. Remanded for a new trial.

Husband and wife operated a mortgage fraud scheme that bought residential properties and sold those properties to nominee buyers at inflated prices. They provided lenders with false information about buyers' finances, sources of down payments, and intentions to occupy the residences. The scheme involved 37 separate transactions and resulted in net loss of more than $700,000 to various lenders. After the scheme collapsed, they went bankrupt but were not immediately prosecuted. Wife worked as a nurse in a pediatric intensive care unit. Husband worked as a installer and technician. They raised their three children and became fully engaged in their community. On the day before the ten-year statute of limitations would have expired, the government charged them with wire fraud, 18 U.S.C. 1343, and two counts of bank fraud, 18 U.S.C. 1344. They pled guilty to a single count of wire fraud, and were sentenced based on the 2010 USGS, wife to 41 months in prison, and husband to 63 months, and ordered to pay more than $700,000 in restitution. The Seventh Circuit remanded, stating that the sentencing judge failed to consider adequately unusually strong evidence of self-motivated rehabilitation. For this reason, we vacate their sentences

Defendant appealed from a judgment convicting him of (1) conspiracy to violate the Iranian Transaction Regulations (ITR) and operate an unlicensed money-transmitting business; (2) violating the ITR; (3) operating an unlicensed money-transmitting business; and (4) two counts of making false statements in response to government subpoenas. On appeal, defendant argued that the district court erred in several respects when instructing the jury on the conspiracy, ITR, and money-transmitting counts; defendant was entitled to a new trial on the false statement counts because the government constructively amended the indictment; the government committed misconduct in its rebuttal summation, which he claimed necessitated a new trial on all counts; and defendant should be resentenced because the district court miscalculated the applicable offense level. The court reversed Count One to the extent it alleged a violation of the ITR as an overt act and vacated and remanded to the extent it was based on the money-transmission violation as an overt act; reversed Count Two; vacated and remanded Count Three; and affirmed Counts Four and Five.