Justia Banking Opinion Summaries

Articles Posted in Criminal Law
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In this case, Pamela Kathryn Conley appealed her sentence for bank fraud and aggravated identity theft. She argued that the district court incorrectly calculated her loss amount for the bank fraud offense, and that the court erred in accepting her guilty plea for aggravated identity theft.Conley had applied for loans at seven financial institutions using false employment and salary information, and in some cases, she forged the signatures of financial institution employees to create false lien releases for vehicles she used as collateral. She pled guilty to 24 counts of bank fraud and 4 counts of aggravated identity theft.On appeal, the United States Court of Appeals for the Tenth Circuit found that the district court had erred in calculating the loss amount for the bank fraud offense. The court vacated Conley's sentence for bank fraud and remanded for resentencing on those counts. The court determined that the district court had relied on disputed facts in the presentence report to calculate Conley's U.S. Sentencing Guidelines range for bank fraud, which was procedurally unreasonable.However, the court affirmed Conley's convictions for aggravated identity theft. Conley had argued that the court erred in accepting her guilty plea for this offense in light of the Supreme Court's decision in Dubin v. United States. But the appeals court found that any potential error in accepting the guilty plea was not plain or obvious under current, well-settled law. View "United States v. Conley" on Justia Law

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Pacilio and Bases were senior traders on the precious metals trading desk at Bank of America. While working together in 2010-2011, and at times separately before and after that period, they engaged in “spoofing” to manipulate the prices of precious metals using an electronic trading platform, that allows traders to place buy or sell orders on certain numbers of futures contracts at a set price. It is assumed that every order is bona fide and placed with “intent to transact.” Spoofing consists of placing a (typically) large order, on one side of the market with intent to trade, and placing a spoof order, fully visible but not intended to be traded, on the other side. The spoof order pushes the market price to benefit the other order, allowing the trader to get the desired price. The spoof order is canceled before it can be filled.Pacilio and Bases challenged the constitutionality of their convictions for wire fraud affecting a financial institution and related charges, the sufficiency of the evidence, and evidentiary rulings relating to testimony about the Exchange’s and bank prohibitions on spoofing to support the government’s implied misrepresentation theory. The Seventh Circuit affirmed. The defendants had sufficient notice that their spoofing scheme was prohibited by law. View "United States v. Bases" on Justia Law

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Palladinetti and others purchased 30 Chicago-area apartment buildings and resold individual apartments as condominiums. Using a process that Palladinetti helped create, his co-defendants bought the buildings, falsely representing to lenders that they had made down payments. Palladinetti served as his co-defendants’ attorney for the purchases and sales and as the registered agent for LLCs formed to facilitate the scheme. The group recruited buyers for the condominiums and prepared their mortgage applications, misrepresenting facts to ensure they qualified for the loans.Palladinetti and his co-defendants were charged with seven counts of bank fraud, 18 U.S.C. 1344(1) and (2), and nine counts of making false statements on loan applications, 18 U.S.C. 1014 and 2. Count one involved a $345,000 mortgage that Palladinetti’s wife obtained for the purchase of a residence. That mortgage application was prepared using the group’s fraudulent scheme in July 2005. The government agreed to dismiss all other counts if Palladinetti were convicted on count one. Because Palladinetti stipulated to almost all elements of section 1344(1), the trial was limited to whether the bank he defrauded was insured by the FDIC when the mortgage application was submitted.The Seventh Circuit affirmed his conviction. The testimony and exhibits demonstrated that one entity was continuously insured, 1997-2008, that on the date the mortgage was executed that entity was “Washington Mutual Bank” and also did business as “Washington Mutual Bank, FA,” and that entity was the lender for the mortgage at issue. View "United States v. Palladinetti" on Justia Law

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Halkbank, a commercial bank that is majority-owned by the Government of Turkey, was charged with crimes related to its participation in a multi-year scheme to launder billions of dollars' worth of Iranian oil and natural gas proceeds in violation of U.S. sanctions against the Government of Iran and Iranian entities and persons. Halkbank moved to dismiss the indictment but the district court denied the motionThe Second Circuit held that it has jurisdiction over the instant appeal under the collateral order doctrine. The court also held that, even assuming the Foreign Sovereign Immunities Act (FSIA) applies in criminal cases—an issue that the court need not, and did not, decide today—the commercial activity exception to FSIA would nevertheless apply to Halkbank's charged offense conduct. Therefore, the district court did not err in denying Halkbank’s motion to dismiss the Indictment. The court further concluded that Halkbank, an instrumentality of a foreign sovereign, is not entitled to immunity from criminal prosecution at common law. View "United States v. Bankasi" on Justia Law

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Heine and Yates, bank executives, were convicted of conspiracy to commit bank fraud (18 U.S.C. 1349) and 12 counts of making a false bank entry (18 U.S.C. 1005). The government told the jury that the two conspired to deprive the bank of accurate financial information in its records, the defendants’ salaries, and the use of bank funds.The Ninth Circuit vacated. There is no cognizable property interest in the ethereal right to accurate information. Distinguishing between a scheme to obtain a new or higher salary and a scheme to deceive an employer while continuing to draw an existing salary, the court held that the salary-maintenance theory was also legally insufficient. Even assuming the bank-funds theory was valid, the government’s reliance on those theories was not harmless. The court instructed the jury that it could find the defendants guilty of making false entries as co-conspirators, so the court also vacated the false-entry convictions. The court noted that insufficient evidence supported certain false entry convictions. View "United States v. Yates" on Justia Law

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Metaxas was the president and CEO of Gateway Bank in 2008, during the financial crisis. Federal regulators categorized Gateway as a “troubled institution.” Gateway tried to raise capital and deal with its troubled assets. Certain transactions resulted in a lengthy investigation. The U.S. Attorney became involved. Metaxas was indicted. In 2015, she pleaded guilty to conspiracy to commit bank fraud. Gateway sued Metaxas based on two transactions involving Ideal Mortgage: a March 2009 $3.65 million working capital loan and a November 2009 $757,000 wire transfer. A court-appointed referee awarded Gateway $250,000 in tort-of-another damages arising from “the fallout” from the first transaction, and $132,000 in damages for the second.The court of appeal affirmed, rejecting arguments that the first transaction resulted in “substantial benefit” to Gateway and that Metaxas had no alternative but to approve the wire transfer. Gateway did not ask for any purported “benefit.” The evidence showed that the Board would not have approved either the toxic asset sale or the working capital loan if Metaxas had disclosed the true facts. Metaxas damaged Gateway’s reputation. Metaxas knew that the government was trying to shut Ideal down but approved the wire transfer on the last business day before Ideal was shut down, by expressly, angrily, overruling the CFO. View "Gateway Bank, F.S.B. v. Metaxas" on Justia Law

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Wilmington Trust financed construction projects. Extensions were commonplace. Wilmington’s loan documents reserved its right to “renew or extend (repeatedly and for any length of time) this loan . . . without the consent of or notice to anyone.” Wilmington’s internal policy did not classify all mature loans with unpaid principals as past due if the loans were in the process of renewal and interest payments were current, Following the 2008 "Great Recession," Wilmington excluded some of the loans from those it reported as “past due” to the Securities and Exchange Commission and the Federal Reserve. Wilmington’s executives maintained that, under a reasonable interpretation of the reporting requirements, the exclusion of the loans from the “past due” classification was proper. The district court denied their requests to introduce evidence concerning or instruct the jury about that alternative interpretation. The jury found the reporting constituted “false statements” under 18 U.S.C. 1001 and 15 U.S.C. 78m, and convicted the executives.The Third Circuit reversed in part. To prove falsity beyond a reasonable doubt in this situation, the government must prove either that its interpretation of the reporting requirement is the only objectively reasonable interpretation or that the defendant’s statement was also false under the alternative, objectively reasonable interpretation. The court vacated and remanded the conspiracy and securities fraud convictions, which were charged in the alternative on an independent theory of liability, View "United States v. Harra" on Justia Law

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Spring Hill owned a 240-apartment complex in a Chicago suburb. In 2007, the owner converted the apartments into condominiums and attempted to sell them. Ginsberg recruited several people to buy units in bulk, telling them they would not need to put their own money down and that he would pay them after the closings. The scheme was a fraud that consisted of multiple components and false statements to trick financial institutions into loaning nearly $5,000,000 for these transactions. The seller made payments through Ginsberg that the buyers should have made, which meant that the stated sales prices were shams, the loans were under-collateralized, and the “buyers” had nothing at stake. The seller paid Ginsberg about $1,200,000; Ginsberg used nearly $600,000 to make payments the buyers should have made, paid over $200,000 to the buyers and their relatives, and kept nearly $400,000 for himself. The loans ultimately went into default, causing the financial institutions significant losses.The Seventh Circuit affirmed Ginsberg’s bank fraud conviction, 18 U.S.C. 1344. The evidence was sufficient for the jury to conclude Ginsberg knew that the loan applications, real estate contracts, and settlement statements contained materially false information about the transactions, including the sales prices, the down payments, and Ginsberg's fees. The court rejected a challenge to the admission of testimony by a title company employee. View "United States v. Ginsberg" on Justia Law

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In 2006-2009,, Ghuman and Khan “flipped” 44 gas stations. Ghuman would recruit a buyer before they purchased the station. The buyers lacked the financial wherewithal to qualify loans. Ghuman and Khan's co-defendant, AEB loan officer Brahmbhatt, arranged loans based on fraudulent documentation. They also created false financial statements for the gas stations. Co-defendant Mehta, an accountant, prepared fictitious tax returns. The loans, which were guaranteed by the Small Business Administration, went into arrears. In 2008-2009 the SBA began auditing the AEB loans; the FBI began looking into suspected bank fraud. AEB ultimately incurred a loss in excess of $14 million.Khan cooperated and pled guilty to one count of bank fraud, 18 U.S.C. 1344, in connection with a $331,000 loan. Ghuman pleaded guilty to another count of bank fraud in connection with a $744,000 loan and to one count of filing a false tax return, 26 U.S.C. 7206. The district court denied Ghuman credit for acceptance of responsibility and imposed a below-Guidelines prison term of 66 months. The court ordered Khan to serve a 36-month prison term and ordered Ghuman to pay $11.8 million and Khan to pay $10.8 million in restitution. The Seventh Circuit affirmed the sentences with an adjustment to Ghuman’s term of supervised release. View "United States v. Khan" on Justia Law

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The Supreme Court reversed the judgment of the court of appeals vacating the trial court's decision ordering Defendant, who pleaded guilty to cashing seven forged checks at branches of three different banks, to pay restitution to the banks in the amount of the forged checks, holding that a bank that cashes a forged check and then recredits the depositor's account is a victim to which the forger can be required to pay restitution.In reversing the trial court's judgment, the court of appeals determined that the banks were not "victims" for purposes of Ohio Rev. Code 2929.18, the statute authorizing a trial court to order an offender to pay restitution to a "victim" who suffers an economic loss, but were instead third parties who had reimbursed the account holders, who were the true victims. The Supreme Court reversed, holding that the banks were victims of Defendant's fraud that suffered an economic loss thereby, and therefore, the trial court properly ordered Defendant to pay restitution to the banks under section 2929.18. View "State v. Allen" on Justia Law