Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

As one of the largest developers in Cincinnati, Erpenbeck defrauded buyers and banks out of nearly $34 million. Erpenbeck pled guilty to bank-fraud in 2003, received a 300-month sentence, and was ordered to forfeit proceeds: $33,935,878.02, 18 U.S.C. 982(a). The FBI later learned that Erpenbeck had given a friend more than $250,000 in cash. The friend put the cash in a cooler and buried it on a golf course. Agents unearthed the cooler. The government sought forfeiture of the cash and posted online notice in 2009. Three months later, the trustee of Erpenbeck’s bankruptcy estate contacted an Assistant U.S. Attorney, told her the estate had an interest in the cash and asked about the government's plans. The attorney did not mention the forfeiture proceedings. Because no one asserted an interest, the district court entered an order vesting title to the cash in the government, 21 U.S.C. 853(n)(7). The trustee sought to stay the order in November 2010. The district court denied the motion because the trustee did not file a timely petition. The Sixth Circuit vacated. Even though the trustee’s interest in the cash was "far from a mystery," the government did not take even the "modest step" of sending a certified letter. View "United States v. Erpenbeck" on Justia Law

In the 1990s debtors owned a business that failed and incurred liabilities from unpaid taxes. They had a monthly payment obligation to the IRS. Husband obtained employment; 2003 to 2009, his yearly gross income was between $53,000 and $59,000. In addition, he receives $1,300 per month from a settlement annuity. Wife was employed as a bookkeeper until 1999. In 2000, she pled guilty to felony embezzlement of funds from her former employer and was sentenced to probation and required to pay restitution of $800 per month. Before her indictment wife obtained employment as a bookkeeper for plaintiff, began embezzling, and deposited stolen funds to Debtors’ joint bank accounts. By 2006, she had embezzled $283,391.88 from plaintiff and forged credit card purchases of $2,821.43. In 2007, she embezzled $328,516.10. In 2008, she embezzled $11,230.21. She stole goods valued at $127,156 from her employer. Debtors spent accordingly. The Bankruptcy Court entered an order excepting debt owed to plaintiff from discharge under 11 U.S.C. 523(a)(6), finding that husband conspired with wife to convert embezzled funds and other property. The Sixth Circuit affirmed, holding that Debtors’ conduct constituted willful and malicious injury to plaintiff. View "In re: Cottingham" 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

Mitchell was a partner in the Cleveland law firm from the early 1980s until 2006. There was no formal partnership agreement; each partner practiced in a different area of law, and each represented his clients with essentially no oversight, but shared evenly in the firm's profits. Mitchell was indicted for his involvement in a long-running scheme to bribe the auditor of Cuyahoga County into awarding overvalued contracts for appraisal work to a company formed by his law partners. The indictment charged conspiracy to commit bribery concerning programs receiving federal funds, 18 U.S.C. 371; bribery concerning programs receiving federal funds, 18 U.S.C. 666(a)(2); and conspiracy to violate the Hobbs Act, 18 U.S.C. 1951. The district court granted Mitchell acquittal on the Hobbs Act charge, but a jury convicted him of the remaining two counts. He was sentenced to 97 months. The Sixth Circuit affirmed, rejecting a challenge to the jury instruction that deliberate ignorance, in some instances, can constitute knowledge, and a challenge to the sentence. View "United States v. Mitchell" 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

Defendants, two of three lawyers who represented several hundred Kentucky clients in a mass-tort action against the manufacturer of the defective diet drug "fen-phen," settled the case for $200 million, which entitled them under their retainer agreements to approximately $22 million each in attorney fees. By visiting clients and obtaining their signatures on "confidential settlements," for lesser amounts, the two actually disbursed slightly more than $45 million, less than 23 percent of the total settlement. The lawyers kept the remainder for themselves and associated counsel, transferring much of it from the escrow account to various other accounts, including out-of-state accounts. The scheme was discovered; the lawyers were disbarred and convicted of conspiracy to commit wire fraud, 18 U.S.C. 1343, 1349. One was sentenced to 240 months, the other to 300 months. They were ordered to pay more than $127 million in restitution. The Sixth Circuit affirmed, rejecting a variety of challenges to the sufficiency of the evidence and trial procedures.

In 2004, actor John Stamos visited a resort with a group of male friends and met Coss, then 17 years old. Coss and her friend attended a party at Stamos's hotel room. Alcohol was served. Stamos and Coss corresponded for several years and, in 2005, Coss flew to Chicago to visit Stamos while he was filming a television show. In 2008, Coss began dating Sippola. After Sippola saw photographs that Coss had of Stamos, the two devised a plan to obtain money from Stamos in exchange for the photographs. They created two fictitious personas. Emails from a fictional 17-year-old girl whom Stamos had purportedly impregnated while on vacation resulted in a cease-and-desist letter. Coss then indicated that another party had pictures of them using drugs and trashing the hotel room. Stamos's lawyer contacted law enforcement. The FBI stepped in and reached an agreement with Sippola’s fictional character to purchase the photographs for $680,000. Sippola and Coss were convicted of conspiracy to commit extortion 18 U.S.C. 371; 875(d) and sentenced to 48 months.. The Sixth Circuit affirmed, rejecting a challenge to sufficiency of the evidence and a claim to downward adjustment for acceptance of responsibility under USSG 3E1.1.

Hardesty, a resident of Utah, solicited Schneider, a physician and resident of Ohio, for an investment involving purchase of medical-malpractice insurance from Hardesty's foreign-based company. The investment was to provide federal-tax benefits and make him a partial owner of an insurance company. Hardesty's $500,000 was transferred and eventually frozen because of SEC proceedings against a Ponzi scheme involving more than $100,000,000. Hardesty hired Nelson, a Utah attorney, to recover the funds. Nelson corresponded with Schneider and the defendants, but did not recover the money. Schneider sued multiple defendants, including Hardesty and Nelson, alleging fraud and misrepresentation. Schneider alleged that letters written by Nelson contained false statements by which Nelson furthered the scheme to defraud Schneider. The district court dismissed for lack of jurisdiction. The Sixth Circuit reversed. The district court improperly applied the preponderance-of-the-evidence standard, as opposed to the prima facie standard, in determining whether Schneider pleaded facts sufficient to establish personal jurisdiction over Nelson, but the exercise of jurisdiction comports with due process and is proper under Ohio's long-arm statute even under the more demanding standard.

Plaintiffs, seven couples who sent money to the defendants (adoption agency and individuals) to facilitate adoptions, in some cases of specific children, believed they had been defrauded and filed federal claims. The case was stayed, pending resolution of state criminal charges. The district court subsequently dismissed claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1962. The complaint identified the agency as the enterprise; identified predicate violations of mail fraud and wire fraud, 18 U.S.C. 341 and 1343, extortion, 18 U.S.C. 1951; transmitting or transferring in interstate commerce goods, wares, merchandise, or money knowing the same to have been stolen, converted, or taken by fraud, 18 U.S.C. 2314; and traveling in interstate or foreign commerce with the intent to distribute the proceeds of extortion, 18 U.S.C. 1952; and alleged a conspiracy among the individual defendants. The Sixth Circuit reversed. Four of plaintiffs' claims adequately alleged predicate acts of mail or wire fraud and adequately alleged a threat of continued criminal activity and, therefore, a pattern of racketeering activity.

Defendant, a businessman, was convicted on 10 counts of bank fraud (18 U.S.C. 1344) involving creation of 10 fraudulent entries on the books of a small bank in Benton, Tennessee. At trial, the government offered the theory that defendant and the bank's president jointly created the phony entries in an effort to disguise earlier, troubled loans to defendant's business. The Sixth Circuit reversed, finding that the evidence was insufficient to prove guilt beyond a reasonable doubt. The court improperly excluded evidence that the bank president had, unassisted, previously engaged in a large number of identical frauds. The prosecutor suggested to the jury that acquittal would deliver a financial windfall to defendant. The government offered no direct evidence and insufficient circumstantial evidence to show that defendant knew about or participated in the bank president's fraud, a fraud that the bank president had independent reasons for creating.