Justia Banking Opinion Summaries

Robers, convicted of submitting fraudulent mortgage loan applications to two banks, argued that the district court miscalculated his restitution obligation under the Mandatory Victims Restitution Act of 1996, 18 U.S.C. 3663A–3664, which requires property crime offenders to pay “an amount equal to ... the value of the property” less “the value (as of the date the property is returned) of any part of the property that is returned.” The court ordered Robers to pay the difference between the amount lent to him and the amount the banks received in selling houses that had served as collateral. Robers argued that the court should have reduced the restitution amount by the value of the houses on the date on which the banks took title to them since that was when “part of the property” was “returned.” The Seventh Circuit and a unanimous Supreme Court affirmed. “Any part of the property ... returned” refers to the property the banks lost: the money lent to Robers, not to the collateral the banks received. Because valuing money is easier than valuing other property, this “natural reading” facilitates the statute’s administration. For purposes of the statute’s proximate-cause requirement, normal market fluctuations do not break the causal chain between the fraud and losses incurred by the victim. Even assuming that the return of collateral compensates lenders for their losses under state mortgage law, the issue here is whether the statutory provision, which does not purport to track state mortgage law, requires that collateral received be valued at the time the victim received it. The rule of lenity does not apply here. View "Robers v. United States" on Justia Law

Based on a real estate financing fraud scheme during the housing bubble, Brunt, Farano, Murphy, and Scullark were charged with mail and wire fraud; Brunt and Scullark with money laundering and Farano with theft of federal government funds, 18 U.S.C. 641, 1341, 1343, 1957(a). The scheme involved buying HUD-owned properties at a discount by using a “front” nonprofit corporation that received kickbacks. The properties were resold, with false promises that the defendants would rehabilitate the properties and find tenants. The defendants obtained the mortgages for buyers by submitting false information regarding the conditions of the properties and buyers’ assets, income, employment, and intentions to occupy the properties. A loan officer and appraisers were bribed. The judge refused to severe the trials. A jury convicted the defendants, and the judge sentenced Brunt to 151 months in prison, Farano to 108, Murphy to 72, and Scullark to 78. He ordered them all to pay restitution. The Seventh Circuit affirmed except regarding an order of restitution to refinancing lenders, which it vacated for consideration of whether the refinancing banks that are seeking restitution had based their refinancing decisions on fraudulent representations by the defendants. The court expressed concern about how long the case has taken.View "United States v. Scullark" on Justia Law

Malone owned a cattle feedlot. He cared for cattle, including some owned by GLS, and worked as an agent of GLS to buy cattle. Anderson was president of GLS, which was owned by others. GLS’s cattle were collateral for its loans. In 2008, the feedlot started losing money, jeopardizing Malone’s business and GLS’s loans. Malone and Anderson began kiting checks; one would write a check to the other, and before it was collected, the other would write a check back to the first. Malone was overdrawn by $400,000 in 2009. Malone and Anderson arranged to sell O’Hern 700 cattle. O’Hern paid $400,000, which Malone deposited to his overdrawn bank account. In reality, there were no cattle. Malone gave O’Hern $115,000. Unsatisfied, O’Hern visited the feedlot and removed cattle that did not belong to Malone; obtained liens on property owned by Malone and Anderson; and filed a state court civil suit. Malone pled guilty to bank fraud and money laundering. He urged the district judge to refrain from ordering restitution, arguing that O’Hern had already received full recovery and that the judge exercise her discretion under 18 U.S.C. 3663A(c)(3)(B), because the need to compensate O’Hern was outweighed by the burden of determining complex issues regarding his losses. The judge imposed restitution of $285,000, stating that she had no discretion under the Mandatory Victims Restitution Act, 18 U.S.C. 3663A.The Seventh Circuit affirmed the award as supported by the preponderance of the evidence regarding O’Hern’s loss and the cash returned to him, the only relevant factors. It would have been error for the judge to consider other amounts O’Hern may be adjudged to owe Malone or Anderson in the state court litigation. View "United States v. Malone" on Justia Law

As a mortgage broker, Chandler was able to falsify documents, close fraudulent loans, and judge what a house would appraise for after cosmetic work. In 2005, Causey and Rainey founded a construction company to make minimal changes to houses. They recruited real estate novices to buy houses. Chandler would fill out a mortgage application, falsifying income, down payments and other information to make the buyer a viable loan candidate. She would order appraisals, title work and pre‐approval from the lender. A “trainee” appraiser reported a greatly inflated price. Chandler gave false information to the lenders on HUD‐1 statements. Chandler made up false construction invoices for the remainder of the loan after expenses were paid. Before the participants were arrested, they had executed the mortgage scheme 25 times. Causey, the only co‐conspirator who did not plead guilty, was convicted. The Seventh Circuit affirmed, rejecting arguments that the court improperly admitted prejudicial photographs taken of the houses around the time of trial rather than at the time of the sale and evidence of a fraudulent sale that took place outside of the conspiracy. A defense witness’s testimony was properly excluded as undisclosed expert testimony. The court also upheld admission of testimony by a co-conspirator and a two‐level sentencing enhancement for being an “organizer, leader, manager, or supervisor.”View "United States v. Causey" on Justia Law

Plaintiffs filed a complaint against their bank and others, asserting a cause of action under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), among other claims, asserting that Defendants engaged in an unlawful scheme to lend Plaintiffs money in violation of federal margin requirements limiting the extent to which securities can be used as collateral for funds loaned to purchase the securities. The district court (1) dismissed the complaint as to two defendants for failure of service, and (2) dismissed the remainder of the suit for failure to state a claim upon which relief could be granted, finding that the alleged misconduct was not actionable under RICO, which does not encompass private claims that would have been actionable as securities fraud. The First Circuit Court of Appeals affirmed, holding that the district court (1) correctly concluded that Plaintiffs failed to state a claim for relief under RICO; and (2) did not abuse its discretion in dismissing the complaint as to two defendants for failure of service. View "Calderon-Serra v. Banco Santander P.R." on Justia Law

Abair emigrated from Russia in 2005 and married an American citizen. Abair owned an apartment in Moscow. After her divorce, Abair sold the apartment and deposited the proceeds with Citibank Moscow. She signed a contract to buy an Indiana home for cash. Citibank refused to transfer funds because her local account was in her married name and the Moscow account used her birth name. Over two weeks Abair withdrew the daily maximum ($6400) from Citibank ATMs and deposited $6400 to $9800 at her local bank. A deposit on Tuesday, May 31 followed the Memorial Day weekend and was posted with one made on Saturday, pushing her “daily” deposit over the $10,000 trigger for reporting, 31 U.S.C. 5313(a). Abair was charged with structuring financial transactions to evade reporting. IRS agents testified that during her unrecorded interview, Abair, who is not fluent in English, revealed knowledge of the reporting rules. Abair testified that she was aware of the limit when she spoke with the agents, but had learned about it after making the deposits, when she asked why identification was required. She said her deposit amounts were based on how much cash would fit in her purse. Abair was convicted and agreed to forfeit the entire proceeds. The Seventh Circuit remanded, finding that the government lacked a good faith basis for believing that Abair lied on tax and financial aid forms and that the court erred (Rule 608(b)) by allowing the prosecutor to ask accusatory, prejudicial questions about them. On the record, Abair is at most a first offender, according to the court, which expressed “serious doubts” that forfeiture of $67,000 comports with the “principle of proportionality” under the Excessive Fines Clause. View "United States v. Abair" on Justia Law

White, Ford, and Helton were involved in a mortgage fraud scheme through White’s company, EHNS. EHNS offered a “mortgage bailout” program, telling homeowners that they could avoid foreclosure by transferring their homes to EHNS for one year, that EHNS investors would pay the mortgage, that the owners could continue to live in their homes, and that they could reassume their mortgages at the program’s conclusion. EHNS investors actually took title outright. White would pressure appraisers to assess the properties at amounts higher than actual value. EHNS would strip actual and manufactured equity by transaction fees. Clients almost never were able to buy back their homes. Lenders foreclosed on many of the properties. Through fraudulent mortgage loan applications, White obtained financing for straw purchasers. Ford was the closing agent, supposed to act as the lender’s representative, but actually fabricating official documents. Helton was the attorney and “represented” homeowners at White’s behest, pocketing legal fees paid out of the equity proceeds and orchestrating a cover‐up by representing the homeowners in subsequent bankruptcy filings. All were convicted of multiple counts of wire fraud, 18 U.S.C. 1343; Helton was also convicted of bankruptcy fraud, 18 U.S.C. 157. The Seventh Circuit affirmed, rejecting claims concerning the sufficiency of the evidence, challenges to joinder of the defendants and to jury instructions, and a Brady claim. View "United States v. White" on Justia Law

Anobah was an Illinois-licensed loan officer, employed by AFFC, and acted as a loan officer for at least two fraudulent schemes. Developers Brown and Adams recruited Mason to act as a nominee buyer of a property and referred Mason to Anobah for preparation of a fraudulent loan application. The application contained numerous material falsehoods concerning Mason’s employment, assets, and income, and intent to occupy the property. Anobah, Brown, and others created fraudulent supporting documents. AFFC issued two loans in the amount of $760,000 for the property and ultimately lost about $290,000 on those loans. In the course of the scheme, AFFC wired funds from an account in Alabama to a bank in Chicago, providing the basis for a wire fraud charge. Anobah played a similar role in other loan applications for other properties and ultimately pled guilty to one count of wire fraud, 18 U.S.C. 1343. The district court sentenced him to 36 months of imprisonment, five months below the low end of the calculated guidelines range. The Seventh Circuit affirmed, upholding application of guidelines enhancements for abuse of a position of trust and for use of sophisticated means in committing the fraud. View "United States v. Anobah" on Justia Law

Miller and his pastor Wellons wanted to buy investment land for $790,000. Miller formed Fellowship, with eight investment units valued at $112,500 each, to purchase the land and recruited investors. Miller and Wellons did not purchase units, but Miller obtained a 19.5% interest as Fellowship’s manager and Wellons obtained a 4.5% interest as secretary. Miller secured $675,000 in investments before closing and obtained a loan from First Bank, representing that DEMCO, one of Miller’s development companies, needed a $337,500 loan that would be paid within six months. Because DEMCO pledged Fellowship’s property, First Bank required a written resolution. The resolution contained false statements that all Fellowship members were present at a meeting, and that, at this nonexistent meeting, they unanimously voted to pledge the property as collateral. Fellowship’s members, other than Miller and Wellons, believed that the property was being purchased free of encumbrances. After the closing, $146,956.75 remained in Fellowship’s account. Miller then exchanged his ownership in Fellowship for satisfactions of debts. Despite having no ownership interest, Miller modified and renewed the loan. Later Miller told Fellowship members the truth. Miller was convicted of two counts of making false statements to a bank, 18 U.S.C. 1014, and two counts of aggravated identity theft, 18 U.S.C. 1028A. The Sixth Circuit affirmed conviction on one count of false statements, but vacated and remanded the other convictions. View "United States v. Miller" on Justia Law

Gray’s friend Johnson offered to act as co‐borrower to help Gray buy a house, if Gray promised that she would only be on the loan as a co‐borrower for two years. In return, Johnson received a finder’s fee from the daughter of the builder-seller (Hinrichs). Mortgage broker Bowling sent their application to Fremont, a federally insured lender specializing in stated‐income loans, with which the lender typically did not verify financial information supplied by applicants. Bowling testified that he told both women that they would be listed as occupants, that their incomes would be inflated, and what the monthly payment would be. The closing proceeded; Gray and Johnson received a $273,700 mortgage from Fremont and, on paper, a $48,300 second mortgage from Hinrichs. Gray and Johnson acknowledge that the application that they signed contained several false statements. Bowling became the subject of a federal investigation. Sentenced to 51 months’ imprisonment, he agreed to testify against his clients. The Seventh Circuit affirmed the convictions of Gray and Johnson under 18 U.S.C. 1014, which prohibits “knowingly” making false statements to influence the action of a federally insured institution. Rejecting an argument that the district court erred by denying an opportunity to present testimony to show Bowling’s history of duping clients, the court stated that his prior wrongdoing was not very probative of Gray’s and Johnson’s guilt. View "United States v. Gray" on Justia Law