Justia Banking Opinion Summaries

In 2000, Marr’s father founded Equipment Source, which sold used forklifts. Marr managed sales and daily operations, advertising online and selling online or by phone. In 2002, his father opened a merchant account at Palos Bank, to process credit card transactions, with Marr as a signatory. Marr sold forklifts that he never owned or possessed. Customers would contact Marr to complain that they received an invoice and notice of shipment, and that Equipment Source charged the credit card, but that the forklift never arrived. While Marr gave varying explanations, he rarely refunded money or delivered the forklifts. Customers had to contact their credit card companies to dispute the charges. The credit card company would send notice of the dispute to Palos Bank, which noticed a high incidence of chargebacks on Equipment Source’s merchant account and eventually froze the company’s accounts. Its loss on Equipment Source’s merchant account was $328,881.89. In 2003, the FBI executed a search warrant at Equipment Source’s offices and Equipment Source ceased doing business. Eight years later, the government charged Marr with six counts of wire fraud. At trial, the government presented testimony from 14 customers who paid for forklifts but never received them; two bank employees who dealt with chargebacks, and a financial expert witness, who confirmed the $328,881.89 loss. The Seventh Circuit affirmed Marr’s conviction, rejecting arguments that the government relied upon improper propensity evidence, that jury instructions incorrectly explained the law, and that the district court lacked the authority to order restitution.View "United States v. Marr" on Justia Law

In 2008-2009 Scalzo was a bank officer at two institutions. He originated and approved loans for unqualified borrowers without adequate financial information or collateral. He forged borrowers’ signatures, redirected funds from the loans to his own personal use without the knowledge of the borrowers, and took funds from some fraudulent loans to pay off balances on previous fraudulent loans, to conceal the original fraud. Scalzo pled guilty to one count of bank fraud, 18 U.S.C. 1344, and one count of money laundering, 18 U.S.C. 1956. The Information listed as part of the scheme six bank loans and three Credit Union loans. Scalzo objected to inclusion of two Credit Union loans in the restitution order. The sentencing range was the same with or without these loans, so the court deferred ruling on restitution and sentenced Scalzo to 35 months of imprisonment. The government filed its additional brief a week later. Having received no additional briefing from Scalzo for 82 days, the court relied on the PSR, the plea agreement and the government’s additional submissions; found that Scalzo arranged the Credit Union loans to conceal the bank fraud; noted that the Credit Union loans were listed as part of the fraudulent scheme detailed in the Information to which Scalzo pled guilty and that the Credit Union lost a substantial amount of money; and ordered him to pay restitution of $679,737.23. The Seventh Circuit affirmed. View "United States v. Scalzo" on Justia Law

When purchasing a house, the defendants submitted loan documents containing false incomes and bank statements, and failed to disclose that husband’s company was selling and his wife was buying. The company received $750,000 and rebated money paid above that amount to husband. The $1 million in loans they received resulted in $250,000 extra that was not disclosed as going to the couple. They were able to sell the house four months later for the same inflated amount, without raising any concerns. They failed to disclose on the HUD-1 forms in the second transaction that they would be giving the buyer kickbacks. The buyer received $1,090,573.06 in loans, but defaulted without making a payment. The lender eventually sold the house for $487,500. Defendants were convicted of three counts of wire fraud, 18 U.S.C. 1343 and aiding and abetting wire fraud, 18 U.S.C. 2. The Presentence Investigation Report determined that the lender’s loss was $603,073.06 and recommended a 14-point enhancement under USSG 2B1.1(b)(1)(H). The Seventh Circuit affirmed the convictions but remanded for explanation of why the loss was “reasonably foreseeable” and why the sentencing enhancement was proper. Involvement in a fraudulent scheme does not necessarily mean it was reasonably foreseeable that all the subsequent economic damages would occur; there was no evidence that defendants knew they were selling to what turned out to be a fictional buyer. View "United States v. Domnenko" on Justia Law

The bank fraud statute, 18 U.S.C. 1344(2), makes it a crime to “knowingly execut[e] a scheme ... to obtain” property owned by, or under the custody of, a bank “by means of false or fraudulent pretenses.” Loughrin was charged with bank fraud after he was caught forging stolen checks, using them to buy goods at a Target store, and then returning the goods for cash. The district court declined to give Loughrin’s proposed jury instruction that section 1344(2) required proof of “intent to defraud a financial institution.” A jury convicted Loughrin. The Tenth Circuit and Supreme Court affirmed. Section 1344(2) does not require proof that a defendant intended to defraud a financial institution, but requires only that a defendant intended to obtain bank property and that this was accomplished “by means of” a false statement. Imposing Loughrin’s proposed requirement would prevent the law from applying to cases falling within the statute’s clear terms, such as frauds directed against a third-party custodian of bank-owned property. The Court rejected Loughrin’s argument that without an element of intent to defraud a bank, section 1344(2) would apply to every minor fraud in which the victim happens to pay by check, stating that the statutory language limits application to cases in which the misrepresentation has some real connection to a federally insured bank, and thus to the pertinent federal interest. View "Loughrin v. United States" on Justia Law

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

The bank fraud statute, 18 U.S.C. 1344(2), makes it a crime to “knowingly execut[e] a scheme ... to obtain” property owned by, or under the custody of, a bank “by means of false or fraudulent pretenses.” Loughrin was charged with bank fraud after he was caught forging stolen checks, using them to buy goods at a Target store, and then returning the goods for cash. The district court declined to give Loughrin’s proposed jury instruction that section 1344(2) required proof of “intent to defraud a financial institution.” A jury convicted Loughrin. The Tenth Circuit and Supreme Court affirmed. Section 1344(2) does not require proof that a defendant intended to defraud a financial institution, but requires only that a defendant intended to obtain bank property and that this was accomplished “by means of” a false statement. Imposing Loughrin’s proposed requirement would prevent the law from applying to cases falling within the statute’s clear terms, such as frauds directed against a third-party custodian of bank-owned property. The Court rejected Loughrin’s argument that without an element of intent to defraud a bank, section 1344(2) would apply to every minor fraud in which the victim happens to pay by check, stating that the statutory language limits application to cases in which the misrepresentation has some real connection to a federally insured bank, and thus to the pertinent federal interest. View "Loughrin v. United States" on Justia Law

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

Patriot was authorized to issue title policies underwritten by First American in Michigan. In 2007, Patriot closed a transaction and provided title insurance and a closing protection letter (CPL) when which WaMu loaned $4,543,593.07 to Truong for the purchase of property in Grosse Ile. In the CPL, First American agreed to indemnify WaMu for actual losses arising from Patriot’s fraud or dishonesty in connection with the closing. In 2008, First American discovered that the Truong transaction was a sham, orchestrated by Patriot’s owner, and obtained title to the property. During negotiations concerning sale of the property, federal regulators closed WaMu. The FDIC became its receiver and sold most of WaMu’s assets to Chase, including the title insurance commitment issued in connection with the Truong transaction. Attempting to resolve the claim, First American tendered a quitclaim deed. Chase refused to accept that deed. First American sought a declaration that First American had fulfilled its obligations under the commitment by tendering a deed to the property. Chase sought a declaration that the deed was void and requested money damages. The FDIC intervened, alleging breach of contract against First American based on the CPL. After the property was sold, First American and Chase stipulated to dismissal of Chase’s claims against First American and First American’s claims against Chase. Chase and the FDIC entered into a stipulation that Chase did not acquire the CPL claim that the FDIC was pursuing. A jury awarded the FDIC $2,263,510.78. The Sixth Circuit affirmed.View "JP Morgan Chase Bank NA v. First Am. Title Ins. Corp." 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

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