Justia Banking Opinion Summaries

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.

Plaintiff partnership was formed for the purpose of facilitating the acquisition of a portfolio of Chinese nonperforming loans (NPLs). The IRS determined that plaintiff was a sham partnership that need not be respected for tax purposes and that plaintiff's allocation of the $200 million loss to the deducting partner should be disallowed. At issue on appeal are the income-tax consequences of three interrelated transactions entered into by plaintiff and its three members. The court held that the district court correctly held that, while the acquisition of an interest in a portfolio of Chinese NPLs had economic substance, the plaintiff partnership was a sham that must be disregarded for federal income-tax purposes. As a consequence, that acquisition must be recharacterized as a direct sale. The court also held that the district court was correct to disallow all accuracy-related penalties on the ground that plaintiff had reasonable cause for, and exhibited good faith in, reporting the positions it took on its 2002 partnership return. Accordingly, the judgment was affirmed.

Appellant was the target of a grand jury investigation seeking to determine whether he used secret Swiss bank accounts to evade paying federal taxes. The district court granted a motion to compel appellant's compliance with a grand jury subpoena dueces tecum demanding that he produce certain records related to his foreign bank accounts. The court declined to condition its order compelling production upon a grant of limited immunity, and pursuant to the recalcitrant witness statute, 28 U.S.C. 1826, held appellant in contempt for refusing to comply. The court held that because the records sought through the subpoena fell under the Required Records Doctrine, the Fifth Amendment privilege against self-incrimination was inapplicable, and appellant could not invoke it to resist compliance with the subpoena's command. The court also held that because appellant's Fifth Amendment privilege was not implicated, it need not address appellant's request for immunity. Accordingly, the judgment of the district court was affirmed.

In connection with an assessment of a taxpayer for unpaid taxes, the IRS began searching for the taxpayer's assets and issued a summons to a bank for a related third party's account information. The taxpayer and third party argued that 26 U.S.C 7609 required the IRS to notify them, which would have enabled them to seek a court order quashing the summons. Applying Ip v. United States, the court held that under the circumstances of the case, no notice was necessary. Therefore, the court affirmed the judgment of the district court.

First Union National Bank of Florida (First Union) appealed a judgment in favor of the Lee County Commission (Commission) and Philip Summers. Mr. Summers executed a mortgage on property he owned within the County on which he built a summer home. The home was ultimately subject to a tax sale by the County. The trustee for Mid-State Trust IV sued the Commission and Mr. Summers in 2009 seeking the excess redemption proceeds from the tax sale of the Summers property. The trustee later filed a motion to substitute First Union as the real party in interest. The trial court eventually entered a judgment finding that Mr. Summers was entitled to the excess funds from the tax sale because he was the last "owner" as defined by state law against whom the taxes were assessed. Upon careful consideration of the trial court’s record and the applicable legal authority, the Supreme Court affirmed the lower court’s decision.