Justia White Collar Crime Opinion Summaries

Thomas and Chapman were part of a scheme to fleece real estate lenders by concocting multiple false sales of the same homes and using the loan proceeds from the later transactions to pay off the earlier lenders. They were convicted of multiple counts of wire fraud. Thomas was also convicted of aggravated identity theft for using an investor’s identity without permission to craft a phony sale of a home that the victim never owned. The Seventh Circuit affirmed, rejecting: challenges to the sufficiency of the evidence; a claim by Thomas that there was no proof that he created or used the falsified documents at issue; Chapman’s claim that there was no evidence that he was the Lamar Chapman identified by the evidence, because no courtroom witness testified to that effect; Chapman’s claim that his due process rights were violated when the government dropped a co-defendant from the indictment; and a claim that the government failed to turn over unspecified exculpatory evidence. The court noted testimony from several victims, an FBI investigator, an auditor, and an indicted co-defendant who had already pleaded guilty. View "United States v. Chapman" on Justia Law

In 2008, Musgrave, a CPA, became involved in a tire recycling venture with Goldberg. Musgrave obtained a loan, guaranteed by the Small Business Administration (SBA), through Mutual Federal Savings Bank. The venture ultimately lost the $1.7 million loan and Musgrave lost his $300,000 investment. In 2011, the two were indicted. Goldberg pled guilty to one count of misprision of felony, and the recommended a sentence of three years of probation, restitution, and a special assessment. Musgrave was convicted of: conspiracy to commit wire and bank fraud and to make false statements to a financial institution, 18 U.S.C. 1349; wire fraud, 18 U.S.C. 1343; bank fraud, 18 U.S.C. 1344. The district court sentenced him to one day of imprisonment with credit for the day of processing, a variance from his Guidelines range of 57 to 71 months and below the government’s recommendation of 30 months. The Sixth Circuit vacated, noting that economic and fraud-based crimes are more rational, cool, and calculated than sudden crimes of passion or opportunity and are prime candidates for general deterrence. The district court relied on impermissible considerations and failed to address adequately how what amounted to a non-custodial sentence afforded adequate general deterrence in this context. . View "United States v. Musgrave" on Justia Law

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

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

Stephen Jenkins brought a tort action against Wells Fargo Bank, N.A. alleging that a Bank teller had improperly accessed Jenkins’s confidential information and given it to her husband, allowing the husband to steal Jenkins’s identity. Jenkins claimed the Bank negligently failed to protect the information, breached a duty of confidentiality, and invaded his privacy. The trial court granted the Bank’s motion for judgment on the pleadings. The Court of Appeals reversed as to Jenkins’s negligence claim after finding that the allegations of his complaint established the elements of negligence. The Supreme Court granted certiorari to consider whether the Court of Appeals erred in holding that a violation of an alleged duty imposed the Gramm–Leach–Bliley Act gave rise to a cause of action for negligence under Georgia law. The Supreme Court concluded that the holding was in error, and reversed that portion of the judgment of the Court of Appeals.View "Wells Fargo Bank, N.A. v. Jenkins" 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

First National Keystone Bank retained an independent accounting firm to audit its records at a time that members of the bank's management were fraudulently concealing the bank's financial condition. The accounting firm issued a clean audit concerning the bank. It was later discovered that the bank had overstated its assets by over $500 million. Upon investigation, the FDIC concluded that the law firm that represented the bank had engaged in legal malpractice. The FDIC settled its claims against the law firm. The accounting firm was later found liable to the FDIC in federal district court for a negligent bank audit. The accounting firm subsequently sued the law firm, alleging fraud, negligent misrepresentation, and tortious interference with the accounting firm's contract to perform the audit. The circuit court granted summary judgment in favor of the law firm. The Supreme Court affirmed, holding that the claims of the accounting firm against the law firm were, in reality, contribution claims rather than direct or independent claims and were, therefore, barred by the settlement agreement between the law firm and the FDIC. View "Grant Thornton, LLP v. Kutak Rock, LLP" 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