Monday, February 20, 2017

Bankster Cited For "Unclean Hands": Appeals Court Nixes $893K Award In Favor Of "Reckless" Lender To Reimburse It For Losses Suffered In Mortgage Fraud Scheme That It Facilitated; Urges Trial Judge To Consider Ordering Scammers Pay "Fines" Rather Than "Restitution", So That Loot Goes To Federal Treasury Instead, "A Far Worthier Recipient Of It Than BOA!"

The Indiana Lawyer reports:
  • Three defendants convicted of wire fraud in the purchase of 16 properties in Gary were clearly guilty of the crimes, but the 7th Circuit Court of Appeals Friday [February 10] threw out a restitution order in favor of Bank of America and urged the district court in Hammond to consider fining the defendants instead.

    The bank was reckless,” Judge Richard Posner wrote in United States of America v. Minas Litos and Adrian and Daniela Tartareanu, 16-1384, -1385, 2248, 2249, 2330. The defendants were convicted of wire fraud, and the 7th Circuit affirmed those convictions, but reversed an order that they pay the bank restitution of $893,015, the amount it claimed was lost in the scheme.

    The defendants were convicted on wire fraud charges filed in 2012 for a scheme in which home buyers were provided down payment kickbacks from the defendants after mortgages were secured on loan applications that provided false information. The defendants then walked away with the purchase price of the properties. But the 7th Circuit wrote Bank of America didn’t have clean hands, and there was little evidence that the bank would not have made the loans had it know the true source of the down payments — the defendants, not the buyers.

    Posner detailed the bank’s dubious mortgage-lending history during the real-estate bubble leading up to the Great Recession, noting for instance one woman to whom the bank issued six mortgages in a 10-day period. Posner noted that District Judge Philip Simon said during sentencing in this case, “Bank of America knew [what] was going on. They’re playing this dance and papering it. Everybody knows it is a sham because no one is assuming any risk. So what’s wrong with saying they’re [of] equal culpability?”

    “Indeed,” Posner continued, “and we are puzzled that after saying this the judge awarded Bank of America restitution — and in the exact amount that the government had sought.”

    Restitution for a reckless bank? A dubious remedy indeed — which is not to say that the defendants should be allowed to retain the $893,015.” That is stolen money,” he wrote. “We don’t understand why the district judge, given his skepticism concerning the entitlement of Bank of America to an award for its facilitating a massive fraud, did not levy on the defendants a fine of not more than the greater of twice the gross gain or the gross loss caused by an offense from which any of $893,015. 18 U.S.C. § 3571(d) authorizes a fine of not more than the greater of twice the gross gain or the gross loss caused by an offense from which any person either derives pecuniary gain or suffers pecuniary loss.”(1)

    The 7th Circuit vacated the restitution order as to the Tartareanus and remanded for full resentencing with the alternative remedy of a heavy fine on the defendants.(2) The panel remanded Litos’ sentencing for the limited purpose of reconsideration of the restitution order with direction to consider whether a fine is possible.
Source: 7th Circuit halts fraud restitution for ‘reckless’ Bank of America.

For the court ruling, see USA v. Litos, et al., Nos. 16-1384, -1385, 2248, 2249, 2330 (7th Cir. February 10, 2017).
(1) The court went on to say:
  • Had the amount of the fraud been made the basis of a fine rather than restitution, the $893,015 would have gone to the federal Treasury, a far worthier recipient of it than Bank of America in this case. At least that is an issue that deserves the further scrutiny of the district court, ...
(2) Ibid.

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