Justia Banking Opinion Summaries

The target witness learned in 2009 that the IRS had opened a file on him, and that an IRS special agent and DOJ tax division prosecutor were assigned to investigate whether he used secret offshore bank accounts to evade income taxes. Two years later, a grand jury issued a subpoena requiring that he produce all records required to be maintained pursuant to 31 C.F.R. 1010.420 relating to foreign financial accounts that he had a financial interest in, or signature authority over. The requested records are required under the Bank Secrecy Act of 1970. The Government argued that the Required Records Doctrine overrides the Fifth Amendment privilege. The district court quashed the subpoena, concluding that the required records doctrine did not apply because the act of producing the required records was testimonial and would compel the witness to incriminate himself. The Seventh Circuit reversed, finding the Doctrine applicable. View "In re: February 2011-1 Grand Jury Subpoena" 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

In 2000 Go-Best wired $5 million to an account entitled "Morris M. Goldings client account" at Citizens Bank, based on representations made by Morris M. Goldings, who was then a Massachusetts attorney. Goldings later admitted that the representations were false and that he had used the money to pay other debts. Go-Best filed suit against Citizens Bank, bringing claims of misrepresentation, conversion, aiding and abetting a fraud, aiding and abetting a breach of fiduciary duty, aiding and abetting a conversion, and negligence. Citizens Bank had no knowledge of Goldings's scheme to defraud Go-Best but failed to notify the Board of Bar Overseers of dishonored checks issued on the client account more than six months before Go-Best wired funds into that account. The trial court dismissed, but a divided Appeals Court reversed in part, vacating dismissal of claims of negligence and of aiding and abetting. The Massachusetts Supreme Court reinstated dismissal. Without actual knowledge, the bank's duty to notify the board of dishonored checks from trust accounts arose only from its contractual duty, not from any duty in tort, so the bank could not be liable to Go-Best for any negligence in fulfilling that duty. View "Go-Best Assets Ltd. v. Citizens Bank of MA" 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

Defendant, a loan officer, recruited buyers to obtain mortgage loans for which they were not qualified by using false information. He was convicted of conspiracy to commit wire fraud and bank fraud, 18 U.S.C. 1349, and bank fraud, 18 U.S.C. 1344. The Second Circuit affirmed. The district court did not err by allowing jurors, after the beginning of jury deliberations and after receiving various cautionary instructions, to take the indictment home to read on their own time. View "United States v. Esso" on Justia Law

During 2000-2002, defendant and co-defendant were associated in five instances of depositing large bad checks (one for $15,000,000) in three different bank accounts (the one at issue in the name of a defunct corporation), then writing checks against the resulting, ostensible account balances or requesting substantial wire transfers from them. They were indicted for conspiracy to commit bank and wire fraud, 18 U.S.C. 371, bank fraud, 18 U.S.C. 1344, wire fraud, 18 U.S.C. 1343, and money laundering, 18 U.S.C. 1957. Defendant was charged both as a principal and as aiding and abetting co-defendant, who negotiated guilty pleas. Defendant was convicted. He appealed, claiming insufficiency of the evidence to show anything more than his mere (innocent) presence at some events in the sequence of the transactions charged, and abridgement of his Sixth Amendment right to jury trial when the trial judge closed the courtroom doors during jury instructions. The First Circuit affirmed. View "United States v. Christi" on Justia Law

Principals of Cybercos defrauded lending institutions out of more than $100 million in loan. In 2002, Huntington granted Cyberco a multi-million-dollar line of credit, and Cyberco granted Huntington a continuing security interest and lien in all of Cyberco's personal property, including deposit accounts. After discovering the fraud, the government seized approximately $4 million in Cyberco assets, including $705,168.60 from a Huntington Bank Account. Cyberco principals were charged in a criminal indictment with conspiring to violate federal laws relating to bank fraud, mail fraud, and money laundering. Count 10 issued forfeiture allegations against individuals regarding Cyberco assets, including the Account. In their plea agreements, defendants agreed to forfeit any interest they possessed in the assets or funds. The district court entered a preliminary order of forfeiture with regard to the assets, including the Account. Huntington filed a claim, asserting ownership interest in the forfeited Account. The district court found that Huntington did not have a legal claim. On remand, the district court again denied the claim. The Sixth Circuit reversed. A party who takes a security interest in property, tangible or intangible, in exchange for value, can be a bona fide purchaser for value of that property interest under 21 U.S.C. 853(n)(6)(B). View "United States v. Huntington Nat'l Bank" on Justia Law

Stokes owned 1Point, which managed employee-benefits plans and 401(k) retirement plans as a third-party administrator (TPA). Most were governed by the Employee Retirement Income Security Act, 29 U.S.C. 1002. TPAs generally provide record-keeping and assist in transferring money, but do not handle money or securities. Stokes directed clients to send funds to accounts he had opened in 1Point’s name. Cafeteria plan clients deposited $45 million and 401(k) clients deposited $5.7 million in accounts at Regions. Because the accounts bore 1Point’s name, Stokes was able to transfer money. Between 2002 and 2006, Stokes stole large sums. Regions failed to comply with the Bank Secrecy Act, 31 U.S.C. 3513, requirements to report large currency transactions, file suspicious-activity reports, verify identities for accounts, and maintain automated computer monitoring. In 2004, the U.S. Financial Crimes Enforcement Network assessed a $10 million fine against Regions. In 2006, Stokes and 1Point filed for bankruptcy. The Trustee filed suit against Regions in bankruptcy court on behalf of victimized plans for which he assumed fiduciary status. The suit was consolidated with plaintiffs’ suit. The district court withdrew the Trustee’s case from bankruptcy court, dismissed ERISA claims, and found that ERISA preempted state law claims. The Sixth Circuit affirmed. View "McLemore v. Regions Bank" 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