Saturday, February 11, 2017
Ind. Decisions - 7th Circuit decided two Indiana cases yesterday
In Douglas Bird v. Nancy A. Berryhill (SD Ind., Lawrence), a 5-page opinion, Judge Psoner writes:
The Social Security Administration denied Douglas Bird’s application for disability insurance benefits. After he sought judicial review, 42 U.S.C. § 405(g), the Commissioner agreed with him that the agency’s adverse decision should be set aside and moved that the matter be remanded for further proceedings before an administrative law judge. But that proposal did not satisfy Bird, who wanted the district court to bypass further proceedings before an ALJ and instead simply direct the agency to award him benefits. The district court refused, precipitating this appeal. * * *In USA v. Minas Litos and Adrian and Daniela Tartareanu (ND Ind., Judge Simon), a 10-page opinion in which he comments at length on the Bank of America and its mortgage practices prior to the financial meltdown of 2008, Judge Posner writes:
[Concerns applicability of findings from the VA]
We close by noting for future reference a recent change in SSA’s regulation regarding decisions by other governmental agencies, such as the VA; see 20 C.F.R. § 404.1504. The current regulation provides that a disability determination by another agency does not bind the SSA. The new regulation adds that for claims filed on or after March 27, 2017, SSA will not try to analyze the other agency’s decision, although it will consider the decision’s supporting evidence. Revisions to Rules Regarding the Evaluation of Medical Evidence, 82 Fed. Reg. 5844, 5848–49 (Jan. 18, 2017) (to be codified at 20 C.F.R. pts. 404 and 416).
Bird requests that the proceedings on remand be expedited; the Commissioner agrees with the request. AFFIRMED
The three defendants were indicted in 2012 on charges of having committed and conspired to commit wire fraud, in violation of 18 U.S.C. §§ 1343 & 1349, by extracting money from lenders (including Bank of America) that had financed the sale of properties owned by the defendants in Gary, Indiana. The fraud lay in the fact that the defendants had represented to Bank of America (we can ignore the other lenders, who are not affected by this litigation) that the buyers of the properties were the source of the down payments on the houses, whereas in fact the defendants were the source, having given the buyers the money to enable them to make the down payments. They had also helped the buyers provide, in their loan applications to Bank of America, false claims of creditworthiness. In each of the transactions the defendants walked away with the purchase price of the property they had sold minus the down payment amount, since the “down payment” they received was their own cash, which they’d surreptitiously transferred to the impecunious buyer.
The defendants’ guilt of fraud is not at issue. The issue is the propriety of the restitution, in the amount of $893,015, that the district judge ordered the defendants to make to Bank of America, on the ground that they had cheated the bank by pretending that the buyers, not they, were the source of the down-payment money for the sale of their houses. The judge credited a written declaration by a Bank of America representative that “had [the Bank] known the true source of [the] down payment funds, [it] would not have issued the subject loans” to the buyers of the properties. The district judge rejected the defendants’ argument that the bank was not entitled to restitution because it had been a coconspirator; he ruled that the bank “did not participate in the kickbacks to buyers or provide false information on loan applications.”
The judge was right about that, and right too that the bank had lost $893,015 as a result of the buyers’ defaulting on the loans that the bank issued to finance the purchase of sixteen houses from the defendants. But he was wrong to take the bank representative at her word; her affidavit provided no basis for determining that she knew that Bank of America wouldn’t have made the loans had it not been for the defendants’ fraudulent statements.
The order of restitution is questionable because Bank of America, though not a coconspirator of the defendants, does not have clean hands. It ignored clear signs that the loans that it was financing at the behest of the defendants were phony. Despite its bright-eyed beginning as an upstart neighborhood bank for Italian-American workers, Bank of America has a long history of blunders and shady practices * * *
To say the bank was merely negligent would be wrong. Recklessness is closer to the mark. Negligence is merely failure to exercise due care; often it is unconscious. Recklessness is knowing involvement in potentially harmful activity. The bank was reckless. It had to know that it would receive applications for mortgage loans from people who knowing or doubting their ability ever to repay them would misrepresent their assets and earning power in order to obtain the loans, their thinking taking the form of “sufficient unto the day is the evil thereof,” a biblical maxim (meaning “live in the present”) that is better applied to spiritual life than to investment decisions. And the bank knew that in a bubble period it would have no difficulty selling the mortgages it had issued—even mortgages doomed to default; the bank’s failure to demand evidence of the financial sufficiency of the mortgagees constituted deliberate indifference to a palpable risk that the bank’s executives must have been aware of. The bank had every incentive to close its eyes to how phony these loan applications were, because it expected to turn around and sell the mortgages to a hapless Fannie Mae. (It was foiled in this scheme, regarding the sixteen properties at issue, only because Fannie Mae noticed just how “irregular” the transactions were and forced Bank of America to take the mortgages back.)
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. 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 $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. * * *
We ask the district judge to give serious consideration on the remand to the possible alternative remedy of a heavy fine on the defendants. With regard to such a possibility the judge may wish to ask either the Board of Governors of the Federal Reserve System or the Office of the Comptroller of the Currency (or both, perhaps in collaboration) to submit an amicus curiae brief addressed to the issue of the appropriateness of an order of restitution in a case such as this. * * *
Bank of America was deliberately indifferent to the risk of losing its own money, because it intended to sell the mortgages and transfer the risk of loss to Fannie Mae for a profit.
Posted by Marcia Oddi on February 11, 2017 12:01 PM
Posted to Ind. (7th Cir.) Decisions