Justia Banking Opinion Summaries

Quality owns dozens of restaurants in several states. To refinance its debt, Quality created subsidiaries (plaintiffs-borrowers) and made a deal with Captec Financial and GE Capital for 34 separate loans totaling $49 million, with each loan secured by a restaurant. The parties disagree about the prepayment requirements for 12 of those loans. The borrowers prepaid according to their own interpretation of the prepayment provision and the lender rejected the effort. The district court granted the lender summary judgment. The Seventh Circuit remanded for the district court to consider extrinsic evidence. The court concluded that extrinsic evidence supported the borrowers’ interpretation and awarded prejudgment interest. The Seventh Circuit affirmed. View "BKCAP, LLC v. CAPTEC Franchise Trust 2000-1" on Justia Law

After being rejected for a mortgage because Hall had a bankruptcy and their joint income was too low, Phillips and Hall applied with Bowling, a mortgage broker, under the “stated income loan program.” Bowling prepared an application that omitted Hall’s name, attributed their combined income to Phillips, doubled that income, and falsely claimed that Phillips was a manager. Phillips signed the application and employment verification form. Fremont extended credit. They could not make the payments; the lender foreclosed. Bowling repeated this process often. He pleaded guilty to bank fraud and, to lower his sentence, assisted in prosecution of his clients. Phillips and Hall were convicted under 18 U.S.C. 1014. The district court prohibited them from eliciting testimony that Bowling assured them that the loan program was lawful and from arguing mistake of fact when in signing the application and employment verification. They argued that they were hindered in showing the lack of intent for a specific-intent crime. The district judge concluded that they sought to argue mistake of law. Jury instructions required acquittal absent a finding, beyond a reasonable doubt, that defendants knew that the statements were false; genuine mistake of fact would have led to acquittal.. The Seventh Circuit affirmed.View "United States v. Phillips" on Justia Law

The Federal Deposit Insurance Corporation (FDIC) sought an order to prohibit brothers George and Robert Michael, former owners, directors, (Robert), officer of Citizens Bank, from participation in the affairs of any insured depository, 12 U.S.C. 1818(e)(7), and civil penalties, 12 U.S.C. 1818(i), for violations of Federal Reserve regulations, breaches of fiduciary duty, and unsafe and unsound practices. The ALJ issued a 142-page decision with detailed findings showing that the Michaels engaged in insider transactions and improper lending practices and recommending that the FDIC Board issue a prohibition order and civil penalties. The FDIC Board affirmed the decision. The Seventh Circuit affirmed. The Michaels urged overturn of numerous adverse credibility determinations and proposed inferences from the record in a way that paints a picture of legitimacy despite the Board’s contrary determinations. The court noted the deference owed the agency determination and found substantial evidence to support the Board’s decision.. View "Michael v. Fed. Deposit Ins. Corp." on Justia Law

In 2005, Banks, a construction worker, wanted to flip houses, but did not have capital. John, a mortgage broker, suggested that they purchase homes from distressed owners at inflated prices, with the sellers promising to return money above what they owed their own lenders. Owners cooperated rather than face foreclosure. Banks renovated the houses using funds received from sellers and resold them. Johns collected a broker’s fee. When they purchased a house from owners in bankruptcy, they wanted a mortgage to secure payment from the sellers and informed the trustee of the bankruptcy estate. Despite protestations by the trustee, the sale went through, and Banks used the rinsed equity to pay off sellers’ creditors through the trustee. The sellers’ lawyer discovered the scheme, which led to indictments. Johns was convicted of making false representations to the trustee regarding the second mortgage and for receiving property from a debtor with intent to defeat provisions of the Bankruptcy Code. With enhancements for financial loss and for targeting vulnerable victims, Johns was sentenced to 30 months. The Seventh Circuit affirmed the conviction, rejecting challenges to sufficiency of the evidence and jury instructions, but remanded for clarification of sentencing enhancements. View "United States v. Johns" on Justia Law

Griffin, a futures commission merchant, went bankrupt in 1998 after one of its customers, Park, sustained trading losses of several million dollars and neither Park nor Griffin had enough capital to cover the obligations. The Bankruptcy Court first relied on admissions by the controlling Griffin partners that they failed to block a wire transfer, allowing segregated customer funds to be used to help cover Park’s (and thus Griffin’s) losses. On remand, the court reversed itself and held that the trustee failed to establish that the partners actually caused the loss of customer funds and failed to establish damages. The district court affirmed, applying the Illinois version of the Uniform Commercial Code to a series of transactions that was initiated by the margin call that caused Griffin’s downfall. The Seventh Circuit affirmed, stating that there is no reason why the transactions at issue (which involved banks in England, Canada, France, and Germany, but not Illinois) would be governed by Illinois law. The Bankruptcy Court’s first decision appropriately relied on the partners’ admission that they failed in their obligation to protect customer funds, which was enough to hold them liable for the entire value of the wire transfer. View "Inskeep v. Griffin" on Justia Law

Investors joined together to buy property. To finance the purchase, they formed a distinct limited liability company, IPA, to negotiate and execute a loan on their behalf with Morgan Stanley. Okun was manager of IPA, which was not allowed to hold an ownership interest in any of the investors. Morgan Stanley sold the loan to an Okun-controlled entity, Lender, LLC, and agreed to offset the purchase price by the amount of funds available in escrow, reserve, and impound accounts, in which it held a security interest and which were, under the terms of the loan, required to reimburse investors for maintenance, taxes, and other property-related expenses. Lender LLC never reestablished the accounts, depriving the Investors of $1,361,184.63. Abandoning their suit against Lender, LLC, the investors claimed that Morgan Stanley breached their loan agreement and committed conversion. The district court granted summary judgment for Morgan Stanley. The Seventh Circuit affirmed. Morgan Stanley was not barred by the Note, the Mortgage, or the RSA from assigning its interest in the escrow accounts to Okun or structuring a sale of the loan as it wished; it committed neither breach of contract nor conversion. View "IP of A W. 86th St.t 1, LLC v. Morgan Stanley Mortg. Capital Holdings, LLC" on Justia Law

Defendant was convicted of armed bank robbery, 18 U.S.C. 2113(a), and sentenced to the statutory maximum of 240 months, in part because of previous convictions for the same crime. The Seventh Circuit affirmed, upholding exclusion of a defense witness on the ground that he was an alibi witness and the defense had not given the prosecution the notice required before trial by FRCP 12.1(a). The proposed testimony, that defendant was calm at his employment as a personal trainer two hours after the robbery, would have no probative value. The court also rejected a challenge to the photo array shown the bank manager, whom the robber had confronted after forcing entry shortly after the bank had closed. The array was suggestive, but any error was harmless. There was no doubt that the dust mask found outside the bank was the robber’s, and DNA found on the dust mask matched defendant’s DNA; all of the bank employees gave a description that matched defendant. View "United States v. Ford" on Justia Law

Sheneman and his son purchased distressed properties, then flipped the properties by operating an elaborate mortgage fraud scheme that convinced unwitting buyers to purchase properties they could neither afford nor rent out after purchasing. Mortgage lenders were duped into financing the purchases through misrepresentations about the buyers and their financial stability. Four buyers with few assets and no experience in the real estate market purchased 60 homes. Most of the homes were eventually foreclosed upon. The buyers and lenders each suffered significant losses. Sheneman was convicted of four counts of wire fraud, 18 U.S.C. 1343, and sentenced to 97 months' imprisonment. The Seventh Circuit affirmed, rejecting challenges to the sufficiency of the evidence and to application of sentencing enhancements for use of sophisticated means and for losses of more than one million dollars. View "United States v. Sheneman" on Justia Law

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

In 1997 Javier unlawfully entered the U.S.; he married in 2001. In 2007 the bank hired wife. Husband, attempting to start a business, could not open a bank account without a social security number. He obtained an individual tax identification number. Wife named him a joint owner on her account and helped use his ITIN to open accounts of his own. The business failed. Husband returned to Mexico to deal with his citizenship. Wife revealed the situation to her supervisor, requesting time off to help husband obtain citizenship. The supervisor agreed and called the bank security officer, who was concerned that the accounts might implicate bank fraud laws. During a meeting, the security officer became angry and berated wife. Wife refused to attend another meeting without her attorney The bank terminated her employment and reported her activity to U.S. Immigration and Customs Enforcement and a consortium of area banks. Wife sued, claiming blacklisting, defamation, emotional distress, and employment discrimination, 42 U.S.C. 2000e. The district court granted the bank summary judgment. The Seventh Circuit affirmed, holding that any discrimination was not based on race or national origin, but on an unprotected classification, husband’s status as an alien lacking permission to be in the country. View "Cortezano v. Salin Bank & Trust Co." on Justia Law