Justia Banking Opinion Summaries

Beginning in 2003, Schmitz convinced financial institutions and others to lend him money, ostensibly for real estate development, by stating that he was the beneficiary of a multi-million dollar trust fund whose assets were available as collateral. There was no trust; Schmitz concocted a trail of paper and digital documents, even creating a phony financial services firm (with a website and virtual office space), and filing suit against fictitious employees of the (non-existent) firm claiming mishandling of the trust. Schmitz obtained more than $6 million from seven banks and two additional lenders. He used about half to pay off previous lenders, and the rest for personal expenses. Schmitz pleaded guilty to mail fraud affecting a financial institution, 18 U.S.C. 1341. Because Schmitz began the charged fraud in 2003, while on supervised release in connection with a prior state conviction, the advisory Guidelines range was 87 to 108 months in prison. The court imposed an 87-month sentence. The Seventh Circuit affirmed, rejecting arguments that “factor creep” in the Guidelines has inflated beyond reason the sentencing range for white collar frauds, particularly for someone of Schmitz’s age (60) and health and concerning the timespan of the fraud. View "United States v. Schmitz" on Justia Law

Harris was a registered representative with an affiliated broker of MetLife and sold insurance, annuities, and other financial products. Investigations by the Illinois Securities Division, MetLife, and the IRS revealed that for almost eight years, Harris had been diverting client funds, using deposit and accounting methods that substantially departed from MetLife’s standard practices. She manipulated software to generate account summaries that falsely displayed the investments that her clients intended to purchase. Harris received $10,938,986.58 in client funds from more than 50 but fewer than 250 clients, reinvested $4,055,945.73 on the clients’ behalf, and used the balance for personal purposes. MetLife settled with clients who suffered a loss, paying more than $7 million. Harris pled guilty to mail fraud, 18 U.S.C. 1341 and money laundering, 18 U.S.C. 1957. The court’s sentencing calculation included addition of 18 offense levels for a loss in excess of $2.5 million, four levels for the number of victims, two levels for sophisticated means, for a total offense level of 35. The final guideline range was 168 to 210 months; the court sentenced her to 210 months in prison plus $6,812,764.98 in restitution. The Seventh Circuit affirmed, rejecting an argument that the court erred in counting married couples as two separate victims. View "United States v. Harris" on Justia Law

In 2004 Wallace financed a home purchase with a $272,315 mortgage. He took a second mortgage of $164,500 for improvements and to pay down debt. In 2006, Wallace sought a refinance loan of $422,500. Midwest obtained an appraisal from Brock, through the now-defunct Accupraise. A former Accupraise employee explained that Midwest would send a requested appraisal value and Brock would return a tailor-made appraisal, often without seeing the property. Accupraise and Brock valued Wallace’s home at $500,000. Unbeknownst to Wallace, his refinance was an adjustable-rate mortgage that allows negative amortization; he had a teaser rate of two percent that quickly multiplied. For securing a high long-term interest rate, Midwest received a premium in excess of $14,000. The loan created insurmountable financial problems for Wallace. He learned that the true 2006 value of his home was $375,000. Wallace declared bankruptcy, surrendered the home, and sued alleging that he was the victim of a fraudulent scheme violating the Racketeer Influenced and Corrupt Organizations Act and Kentucky conspiracy law. Mediation produced a settlement, under which Wallace prevailed on a RESPA claim. The district court granted defendants partial summary judgment. The Sixth Circuit reversed a finding that Wallace did not sufficiently demonstrate that the appraisal proximately caused his financial injuries, but otherwise affirmed. View "Wallace v. Midwest Fin. & Mortg. Servs., Inc." on Justia Law

Based on a mortgage fraud scheme that caused the U.S. Department of Housing and Urban Development (HUD) to insure loans for unqualified applicants based upon forged documents and false information provided by Wendlandt, he pled guilty to one count of conspiracy to defraud the United States, 18 U.S.C. 371, and was sentenced to 42 months in prison. The Sixth Circuit affirmed, rejecting challenges to the district court’s computation of financial loss for purposes of determining his offense level under U.S.S.G. 2B1.1 and to the court’s decision to vary upward from the advisory Guidelines range of 24 to months in prison. View "United States v. Wendlandt" on Justia Law

Westerfield was a lawyer working for an Illinois title insurance company when she facilitated fraudulent real estate transfers in a scheme that used stolen identities of homeowners to “sell” houses that were not for sale to fake buyers, and then collect the mortgage proceeds from lenders who were unaware of the fraud. Westerfield facilitated five such transfers and was indicted on four counts of wire fraud, 18 U.S.C. 1343. She claimed that she had been unaware of the scheme’s fraudulent nature and argued that she had merely performed the typical work of a title agent. She was convicted on three counts. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence, to admission of a codefendant’s testimony during trial, and to the sentence of 72 months in prison with three years of supervised release, and payment of $916,300 in restitution. View "United States v. Westerfield" on Justia Law

From 1997 through 2009 Sachdeva, the vice president for accounting at Koss, instructed Park Bank, where Koss had an account, to prepare more than 570 cashier’s checks, payable to Sachdeva’s creditors and used to satisfy personal debts. She embezzled about $17.4 million, pleaded guilty to federal crimes, and was sentenced to 11 years’ imprisonment. The SEC sued Sachdeva and an accomplice because their scheme caused Koss to misstate its financial position. Koss and Park Bank are litigating which bears the loss in Wisconsin. In this suit, Park Bank argued that Federal Insurance must defend and indemnify it under a financial-institution bond (fidelity bond) provision that promises indemnity for “Loss of Property resulting directly from . . . false pretenses, or common law or statutory larceny, committed by a natural person while on the premises of” the Bank. Sachdeva did not enter the Bank’s premises. She gave instructions by phone, then sent employees to fetch the checks. The district court entered judgment in the insurer’s favor. The Seventh Circuit affirmed; every court that has considered the subject has held that a fraud orchestrated from outside a financial institution’s premises is not covered under the provision, which is standard in the industry. View "Bankmanagers Corp. v. Fed. Ins. Co." on Justia Law

Anchor Mortgage Corporation and its CEO, Munson, were convicted under the False Claims Act, 31 U.S.C. 3729(a)(1), of making false statements when applying for federal guarantees of 11 loans. The district court imposed a penalty of $5,500 per loan, plus treble damages of about $2.7 million. The Seventh Circuit affirmed, rejecting an argument that defendants not have the necessary state of mind, either actual knowledge that material statements were false, or suspicion that they were false plus reckless disregard of their accuracy. The court noted that Anchor submitted bogus certificates that relatives had supplied the down payments that the borrowers purported to have made, when it knew that neither the borrowers nor any of their relatives had made down payments and represented that it had not paid anyone for referring clients to it, but in fact it paid at least one referrer. View "United States v. Munson" on Justia Law

The Federal Trade Commission secured a judgment of $10,204,445 against Sussman and his co-defendants and equitable relief, based on abusive debt collection activities. Sussman subsequently entered a safe deposit box and removed coins that had been “frozen” in connection with the earlier action; he was then convicted of theft of government property, 18 U.S.C. 641, and obstruction of justice, 18 U.S.C. 1503(a) and sentenced to 41 months on each count, to be served concurrently, followed by three years of supervised release. The court also imposed a $15,000 fine and a $200 special assessment. The Third Circuit affirmed, rejecting a challenge to the sufficiency of the evidence and a clam that Sussman should be afforded a new trial because a portion of the trial transcript is unavailable, apparently because a court reporter lost the transcript. The court upheld the admission into evidence of redacted documents from the FTC’s prior civil case and jury instructions on the elements of obstruction of justice and Sussman’s theory of defense. View "United States v. Sussman" on Justia Law

For more than 20 years, Kurlemann built and sold luxury homes in Ohio. In 2005-2006 he borrowed $2.4 million to build houses in Mason. When neither sold, he enlisted realtor Duke, who found two straw buyers, willing to lie about their income and assets on loan applications that Duke submitted to Washington Mutual. Both buyers defaulted. Duke pled guilty to seven counts, including loan fraud and making false statements to a lending institution, and agreed to testify at Kurlemann’s trial. A jury convicted Kurlemann of six counts, including making false statements to a lending institution, 18 U.S.C. 1014; and bankruptcy fraud, 18 U.S.C. 157. The district court sentenced Kurlemann to concurrent 24-month sentences and ordered him to pay $1.1 million in restitution. The district court sentenced Duke to 60 months. The Sixth Circuit affirmed the bankruptcy fraud conviction, based on Kurlemann’s concealment of his interest in property, but reversed and remanded his false statements conviction, finding that the trial court improperly instructed the jury that concealment was sufficient to support conviction. The court also reversed Duke’s sentence, finding that the court failed to explain the sentence it imposed. View "United States v. Kurlemann" on Justia Law

This case stemmed from defendant's arrest for bank fraud. The government appealed the district court's denial of its motion in limine to admit a state court temporary restraining order as evidence against defendant. The court held that, because the government was seeking to admit the state court order for a non-hearsay purpose and because the district court's analysis pursuant to Federal Rule of Evidence 403 did not account for the order's probative value if offered to show knowledge, the court vacated the district court's order and remanded for further proceedings. View "United States v. Dupree" on Justia Law