Justia Banking Opinion Summaries

Shaw used identifying numbers of Hsu's bank account in a scheme to transfer funds from that account to accounts at other institutions from which Shaw was able to obtain Hsu’s funds. Shaw was convicted under 18 U.S.C. 1344(1), which makes it a crime to “knowingly execut[e] a scheme . . . to defraud a financial institution.” The Ninth Circuit affirmed. A unanimous Supreme Court vacated and remanded for consideration of whether the district court improperly instructed the jury that a scheme to defraud a bank must be one to deceive the bank or deprive it of something of value, instead of one to deceive and deprive. The Court rejected Shaw’s other arguments. Subsection (1) of the statute covers schemes to deprive a bank of money in a customer’s account. The bank had property rights in Hsu’s deposits as a source of loans from which to earn profits or as a bailee. The statute requires neither a showing that the bank suffered ultimate financial loss nor a showing that the defendant intended to cause such loss. Shaw knew that the bank possessed Hsu’s account, Shaw made false statements to the bank, Shaw believed that those false statements would lead the bank to release from that account funds that ultimately, wrongfully ended up with Shaw. Shaw knew that he was entering into a scheme to defraud the bank even if he was not familiar with bank-related property law. Subsection (2), which criminalizes the use of “false or fraudulent pretenses” to obtain “property . . . under the custody or control of” a bank, does not exclude Shaw’s conduct from subsection (1). View "Shaw v. United States" on Justia Law

Attorney Goodson received an email from “Fumiko Anderson,” stating that she wanted to hire Goodson to recover money that she was owed in a divorce. Fumiko later stated that her ex-husband had agreed to settle and would mail a check to cover Goodson’s fee plus the settlement amount. The check was drawn on the First American account of an Illinois manufacturer. Goodson deposited the $486,750.33 check in his Citizens Bank client trust account. Fumiko told Goodson she needed the money immediately. Goodson directed the bank to transfer it to a Japanese entity that he believed to be Fumiko. It actually was an Internet-based fraudulent scheme: the “Fumiko Bandit.” When the fraud was discovered First American reimbursed its depositor and sought recovery from Citizens Bank, Goodson, and the Federal Reserve Bank. The Seventh Circuit affirmed judgment for the defendants, rejecting a breach of warranty argument. First American had received a “truncated” electronic image from the Federal Reserve but could have demanded a “substitute check” or could have refused to honor the check. First American was the victim of a mistake, but Illinois law provides no remedy for such a victim against “a person who took the instrument in good faith and for value.” The lawyer and the banks reasonably believed that they were engaged in the commonplace activity of forwarding a check; they did not fall below “reasonable commercial standards of fair dealing.” There was no “negligent spoliation of evidence” in Citizens Bank’s destruction of the original paper check. Goodson owed no professional duty to First American. View "First American Bank v. Federal Reserve Bank of Atlanta" on Justia Law

An employee of a nonprofit serving disabled adult clients used her position to embezzle more than half a million dollars held by the nonprofit for its clients. After the embezzlement was discovered, Travelers Casualty & Surety Company, the nonprofit's insurance company, made the nonprofit whole. Travelers then sought contribution from the bank in federal court. By submitting certified questions of Washington law, that court has asked the Washington Supreme Court to decide, among other things, whether a nonpayee's signature on the back of a check was an indorsement. Furthermore, the Court was also asked whether claims based on unauthorized indorsements that are not discovered and reported to a bank within one year of being made available to the customer are time barred. The Supreme Court answered yes to both questions. View "Travelers Cas. & Sur. Co. v. Wash. Trust Bank" on Justia Law

NBI honored White’s check, resulting in an overdraft of his payroll account of $382,000. Unable to recover the money, NBI closed White’s accounts and obtained a judgment in Indiana state court. White was also convicted on criminal charges. In his subsequent bankruptcy, NBI won its adversary proceeding. White sued current and former NBI officers under the Federal Reserve Act, 12 U.S.C. 503, which establishes civil liability for bank officers and directors who violate the Federal Reserve Act and the False Entry Statute. White alleged violation of the False Entry Statute, 18 U.S.C. 1005, by falsifying official bank reports in order to cover up unauthorized transfers made from White’s NBI business accounts. The district court dismissed for failure to allege that he relied on the false statements. The Seventh CIrcuit affirmed: White did not plead that he was harmed as a consequence of the alleged violations. Finding White’s appeal frivolous, the court granted a motion for sanctions.t View "White v. Keely" on Justia Law

Ajayi, an electrical engineer, wanted to start a business selling MRI products in Africa. He incorporated GRI in Illinois and another company in Africa and sought investors. While traveling, he solicited a $45,000 investment from Brown. After returning home, Ajayi received a $344,657.84 check, payable to another company . He called Brown, who explained that the accounting department had made an error, told Ajayi to deposit the check, and stated that they would work out a way for Ajayi to refund the difference. Ajayi deposited the check through an ATM into his GRI account, which previously had a balance of $90.08, After the check cleared, Brown flew to Chicago and demanded repayment. Pursuant to Brown’s instructions, between December 9 and December 12, 2009, Ajayi wrote at least five checks to himself from the GRI account and cashed them. Ajayi was convicted of five counts of bank fraud, 18 U.S.C. 1344(1) and (2) and money laundering, 18 U.S.C. 1957(a) and was sentenced to 44 months’ imprisonment. The Seventh Circuit found that there was sufficient evidence that Ajayi knew that the check was altered and upheld the exclusion of the emails, but concluded that four bank fraud counts were multiplicitous. View "United States v. Ajayi" on Justia Law

Churn, the owner of a Tennessee construction company, was convicted of seven counts of bank fraud stemming from two schemes in which he received bank loans ostensibly to construct houses, but performed little to no work. The district court sentenced him to 33 months in prison and ordered restitution of $237,950.50. The Sixth Circuit affirmed, rejecting arguments that the district court made evidentiary errors concerning admission of an email statement, admission of testimony concerning a permit, and admission of evidence about another transaction, and that the amount of restitution exceeded a statutory maximum under the Victims Restitution Act, 18 U.S.C. 3663A. View "United States v. Churn" on Justia Law

In 2007 fraudulent checks in the amount of $181,577 were cashed against the accounts of seven Citizens Bank customers in New York, Pennsylvania, and Delaware. Fraud investigator Swoyer discovered that Tolliver’s employee number was the only one used to access all of the accounts; only Tolliver and one assistant manager worked on all of the days on which the accounts were accessed.. Swoyer, Postal Inspector Busch, and a Secret Service agent interviewed Tolliver. At trial, Swoyer testified that he reviewed Tolliver’s entire logbook with her and that Tolliver told him that she had not given her password to anyone and that she always logged off her computer when she walked away from a terminal. Seven of Tolliver’s former co-workers testified they never knew Tolliver’s password or saw it written down. A jury convicted Tolliver of bank fraud, 18 U.S.C. 1344, aggravated identity theft, 18 U.S.C. 1028A(a), and unauthorized use of a computer, 18 U.S.C. 1030. The court imposed a below-Guidelines sentence of 30 months’ imprisonment and restitution. The Third Circuit affirmed. Tolliver, represented by newly appointed counsel, filed a 28 U.S.C. 2255 motion, claiming that her trial counsel was ineffective by failure to investigate. The district court granted her motion without holding an evidentiary hearing. The Third Circuit vacated. View "United States v. Tolliver" on Justia Law

Over four years, Dade, a former licensed real estate agent, with co-defendants, facilitated loans to purchase residential real estate by knowingly providing lenders with false statements and documents. Dade referred potential buyers to loan officers and provided false payroll stubs and W-2 forms from fake companies. Dade (with help) refinanced a mortgage on his own Chicago property, stating that he was paying monthly rent of $1,450 (he did not live in the house), and provided a rental verification from “Jireh,” which did not exist. Dade received a $156,000 loan. He was charged with bank fraud, 18 U.S.C. 1344, wire fraud, section 1343, and mail fraud, section 1341. He pleaded guilty to bank fraud, based on the fraudulent refinancing; the remaining charges were dismissed. The government sought a 2-level upward adjustment for his role as an organizer, leader, manager, or supervisor in the offense, U.S.S.G. 3B1.1(c). When preparing the presentence report, however, the probation officer concluded that a 4-level upward adjustment would be appropriate, stating that the scheme had involved five or more participants and Dade had organized the scheme. The government adopted that position, recounting the facts underlying the charges dismissed as part of Dade’s plea agreement. The Seventh Circuit affirmed his 20-month sentence, upholding the upward adjustment. View "United States v. Dade" on Justia Law

In 2007, Suarez, a 75-year-old widower from Mexico, opened a checking account at an Illinois Chase Bank. DeMarco, the branch manager, assisted him. The two became friends. Suarez was trying to sell his three acre property, listed for $1.8 million. DeMarco convinced Suarez to break his listing contract, indicating that he had a buyer. DeMarco told Suarez that he needed a home equity line of credit (HELOC) to complete the sale. DeMarco obtained a $250,000 HELOC, under Suarez’s name, secured by Suarez’s property. DeMarco caused the lender to transfer the proceeds into a joint checking account, which he opened in his and Suarez’s name. After the transfer, DeMarco withdrew $245,000 and deposited the funds into his personal account. After Chase terminated his employment, DeMarco transferred the funds into new accounts and spent most of the proceeds to pay off his credit card debt, improve his home and on cars and vacations. He used a small fraction of the money to pay off Suarez’s debts. Suarez later noted irregularities in his bank statement and contacted the FBI. DeMarco was convicted of wire fraud, 18 U.S.C. 1343 and sentenced to 48 months in prison. The Seventh Circuit affirmed, rejecting challenges to evidentiary rulings and to the sentence, claiming that the court erred by applying a two-level increase to his base offense level for abuse of a position of trust, U.S.S.G. 3B1.3, and the use of sophisticated means, U.S.S.G. 2B1.1(b)(1). View "United States v. DeMarco" on Justia Law

In 2005, Lee, a Sevierville contractor, owed a substantial debt to Whaley, for loans that financed houses being built by Lee. Whaley proposed to recruit straw buyers for sham purchases of the properties. Eight straw buyers were referred to Bevins, a mortgage broker with whom Whaley had previously dealt. Whaley prepared the contracts and set the prices. Bevins prepared loan applications that falsely inflated the buyers’ incomes and assets and stated that they would bring funds to closing. The closings were conducted by Kerley’s title company. Although none of the buyers brought funds to the closings, Kerley signed HUD-1 forms, indicating that they did. The properties later went into foreclosure. The lenders incurred substantial losses. Lee and Bevins pled guilty and agreed to cooperate. The judge denied Kerley’s motion to sever, concluding that proposed redactions to Whaley’s statement remedied potential violation of Kerley’s Confrontation Clause rights and held that Whaley was not entitled to introduce his own hearsay statements. Both were convicted of money laundering, conspiracy to commit wire fraud affecting a financial institution and bank fraud, wire fraud affecting a financial institution, bank fraud, and making a false statement to a financial institution. They were sentenced to 60 months and 48 months imprisonment, respectively, and ordered to pay $1,901,980.31 in restitution. The Sixth Circuit affirmed the convictions and Kerley’s sentence, rejecting challenges to the sufficiency of the evidence, evidentiary rulings, and the court’s refusal to sever. View "United States v. Whaley" on Justia Law