Justia U.S. Supreme Court Opinion Summaries

Articles Posted in White Collar Crime
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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

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After a grand jury indicted the Kaleys for reselling stolen medical devices and laundering the proceeds, the government obtained a restraining order against their assets under 21 U.S.C. 853(e)(1), to “preserve the availability of [forfeitable] property” while criminal proceedings are pending. An order is available if probable cause exists to think that a defendant has committed an offense permitting forfeiture and the disputed assets are traceable or sufficiently related to the crime. The Kaleys moved to vacate the order, to use disputed assets for their legal fees. The district court allowed them to challenge traceability to the crimes but not the facts supporting the underlying indictment. The Eleventh Circuit and Supreme Court affirmed. In challenging a section 853(e)(1) pre-trial seizure, an indicted defendant is not entitled to contest the grand jury determination of probable cause to believe the defendant committed the crimes. A probable cause finding sufficient to initiate prosecution for a serious crime is conclusive and, generally, a challenge to the reliability or competence of evidence supporting that finding will not be heard. A grand jury’s probable cause finding may effect a pre-trial restraint on a person’s liberty or property. Because the government’s interest in freezing potentially forfeitable assets without an adversarial hearing about the probable cause underlying criminal charges and the Kaleys’ interest in retaining counsel of their own choosing are both substantial, the issue boils down to the “probable value, if any,” of a judicial hearing in uncovering mistaken grand jury probable cause findings. The legal standard is merely probable cause, however, and the grand jury has already made that finding; a full-dress hearing will provide little benefit. View "Kaley v. United States" on Justia Law

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The Comptroller is sole trustee and chooses investments for the employee pension fund of the state of New York and its local governments. The Comptroller’s general counsel recommended against investing in a fund managed by FA; the general counsel then received anonymous e-mails demanding that he recommend the investment and threatening to disclose information about the general counsel’s alleged affair. Some of the e-mails were traced to the home computer of Sekhar, a managing partner of FA, who was convicted of attempted extortion under the Hobbs Act, 18 U.S.C. 1951(a). The Act defines “extortion” as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” The jury specified that the property at issue was the general counsel’s recommendation to approve the investment. The Second Circuit affirmed. The Supreme Court reversed. Attempting to compel a person to recommend that his employer approve an investment does not constitute “the obtaining of property from another” under the Hobbs Act. Congress generally intends to incorporate the well-settled meaning of the common-law terms it uses. Extortion historically required the obtaining of items of value, typically cash, from the victim. The Act’s text requires not only deprivation, but the acquisition of property; the property, therefore, must be transferable. No fluent English-speaker would say that “petitioner obtained and exercised the general counsel’s right to make a recommendation,” any more than he would say that a person “obtained and exercised another’s right to free speech.” View "Sekhar v. United States" on Justia Law

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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

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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

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After a grand jury indicted the Kaleys for reselling stolen medical devices and laundering the proceeds, the government obtained a restraining order against their assets under 21 U.S.C. 853(e)(1), to “preserve the availability of [forfeitable] property” while criminal proceedings are pending. An order is available if probable cause exists to think that a defendant has committed an offense permitting forfeiture and the disputed assets are traceable or sufficiently related to the crime. The Kaleys moved to vacate the order, to use disputed assets for their legal fees. The district court allowed them to challenge traceability to the crimes but not the facts supporting the underlying indictment. The Eleventh Circuit and Supreme Court affirmed. In challenging a section 853(e)(1) pre-trial seizure, an indicted defendant is not entitled to contest the grand jury determination of probable cause to believe the defendant committed the crimes. A probable cause finding sufficient to initiate prosecution for a serious crime is conclusive and, generally, a challenge to the reliability or competence of evidence supporting that finding will not be heard. A grand jury’s probable cause finding may effect a pre-trial restraint on a person’s liberty or property. Because the government’s interest in freezing potentially forfeitable assets without an adversarial hearing about the probable cause underlying criminal charges and the Kaleys’ interest in retaining counsel of their own choosing are both substantial, the issue boils down to the “probable value, if any,” of a judicial hearing in uncovering mistaken grand jury probable cause findings. The legal standard is merely probable cause, however, and the grand jury has already made that finding; a full-dress hearing will provide little benefit. View "Kaley v. United States" on Justia Law

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The Comptroller is sole trustee and chooses investments for the employee pension fund of the state of New York and its local governments. The Comptroller’s general counsel recommended against investing in a fund managed by FA; the general counsel then received anonymous e-mails demanding that he recommend the investment and threatening to disclose information about the general counsel’s alleged affair. Some of the e-mails were traced to the home computer of Sekhar, a managing partner of FA, who was convicted of attempted extortion under the Hobbs Act, 18 U.S.C. 1951(a). The Act defines “extortion” as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” The jury specified that the property at issue was the general counsel’s recommendation to approve the investment. The Second Circuit affirmed. The Supreme Court reversed. Attempting to compel a person to recommend that his employer approve an investment does not constitute “the obtaining of property from another” under the Hobbs Act. Congress generally intends to incorporate the well-settled meaning of the common-law terms it uses. Extortion historically required the obtaining of items of value, typically cash, from the victim. The Act’s text requires not only deprivation, but the acquisition of property; the property, therefore, must be transferable. No fluent English-speaker would say that “petitioner obtained and exercised the general counsel’s right to make a recommendation,” any more than he would say that a person “obtained and exercised another’s right to free speech.” View "Sekhar v. United States" on Justia Law

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Petitioner’s father established a trust for the benefit of petitioner and his siblings, and made petitioner the nonprofessional trustee. The trust’s sole asset was the father’s life insurance policy. Petitioner borrowed funds from the trust three times; all borrowed funds were repaid with interest. His siblings obtained a state court judgment for breach of fiduciary duty, though the court found no apparent malicious motive. The court imposed constructive trusts on petitioner’s interests, including his interest in the original trust, to secure payment of the judgment, with respondent serving as trustee for all of the trusts. Petitioner filed for bankruptcy. Respondent opposed discharge of debts to the trust. The Bankruptcy Court held that petitioner’s debts were not dischargeable under 11 U. S. C. 523(a)(4), which provides that an individual cannot obtain a bankruptcy discharge from a debt “for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” The district court and the Eleventh Circuit affirmed. The Supreme Court vacated. The term “defalcation” in the Bankruptcy Code includes a culpable state of mind requirement involving knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior. The Court previously interpreted the term “fraud” in the exceptions to mean “positive fraud, or fraud in fact, involving moral turpitude or intentional wrong.” The term “defalcation” should be treated similarly. Where the conduct does not involve bad faith, moral turpitude, or other immoral conduct, “defalcation” requires an intentional wrong. An intentional wrong includes not only conduct that the fiduciary knows is improper but also reckless conduct of the kind that the criminal law often treats as the equivalent. Where actual knowledge of wrongdoing is lacking, conduct is considered as equivalent if, as set forth in the Model Penal Code, the fiduciary “consciously disregards,” or is willfully blind to, “a substantial and unjustifiable risk” that his conduct will violate a fiduciary duty. View "Bullock v. BankChampaign, N. A." on Justia Law