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Overturning a Bank Fraud Conviction
Overturning a Bank Fraud Conviction
How Our Attorneys Successfully Challenged Prosecutorial Overreach
When our client was convicted of bank fraud over mortgage loan applications, our attorneys identified a fundamental legal flaw: the government charged him under a statute that did not apply. The loans came from mortgage companies, not banks, at a time when the law did not yet treat the 2 as equivalent. We built an appellate strategy grounded in legal precision, arguing that prosecutors misapplied federal criminal statutes and failed to prove essential elements of the offense.
Our team focused on statutory interpretation, proving that the mortgage companies involved were not “financial institutions” under the federal bank fraud statute in 2006 and 2007. We demonstrated that the government had not shown an intent to defraud a bank and that the losses were not suffered by banks themselves. We also showed that the government had used the longer statute of limitations for bank fraud after missing the deadline to file other charges. While the appeal was pending, we secured our client’s release, so he never served a day in prison.
In August 2019, the U.S. Court of Appeals for the Sixth Circuit reversed all 3 convictions and ordered an acquittal. The decision reaffirmed that prosecutors must charge the right crime, within the right timeframe, and with the right evidence.
Key Facts
3 convictions reversed: Sixth Circuit ruled our client was charged under the wrong law.
0 time served: Our client remained free during the appeal and never went to prison.
$554K restitution vacated: The financial penalty was fully overturned.
The Wrong Statute
In 2006, at the peak of the housing boom, our client was a mortgage broker in Middle Tennessee. The government later alleged that he and a local builder, who was carrying unsold luxury homes, arranged for straw buyers to purchase the properties with loans from SunTrust Mortgage Company and Fifth Third Mortgage Company on applications that misstated the buyers’ incomes and their plans to live in the homes.
When the market crashed and the loans defaulted, the mortgage companies absorbed the losses. Eight years later, in 2014, federal prosecutors charged both men with bank fraud under 18 U.S.C. § 1344 in the Middle District of Tennessee. A jury convicted our client on 3 counts. The court sentenced him to 6 months in prison and ordered him to pay $554,145 in restitution.
The problem with the case was in the caption. Bank fraud requires a bank.
Mortgage Companies Are Not Banks
The appeal turned on statutory interpretation. In 2006 and 2007, when these loans were written, SunTrust Mortgage Company and Fifth Third Mortgage Company did not meet the federal bank fraud statute’s definition of a “financial institution.” Congress amended the statute in 2009 to reach mortgage companies, but that amendment arrived years after the conduct at issue and could not be applied to it.
Corporate law reinforced the point. A mortgage subsidiary and its parent bank are separate entities, and losses absorbed by the subsidiary do not automatically become losses to the bank. The record showed no evidence that the parent banks funded these loans, controlled the funds, or ever received the false statements.
The statute also requires an intent to defraud a bank. Our client’s conduct was directed at mortgage companies.
The Deadline the Government Missed
Mail fraud and wire fraud were the charges the government could have brought, and both carry a 5-year statute of limitations. The government missed that window. Bank fraud carries 10 years, so prosecutors charged bank fraud instead.
The Ruling
On August 5, 2019, following oral argument the previous fall, the Sixth Circuit reversed all 3 convictions and remanded with instructions to enter a judgment of acquittal.
In this case the government charged the defendants with the wrong crimes.
United States Court of Appeals for the Sixth Circuit
- All 3 convictions reversed with instructions to acquit.
- $554,145 in restitution vacated in full.
- A 6-month sentence that was never served.
Why He Never Went to Prison
Appeals take time, and a client who is already incarcerated serves that time no matter how the appeal turns out. After the conviction, the defense secured his release pending appeal. He remained free throughout, and when the Sixth Circuit ruled, he had not spent a day in prison.
What This Outcome Means
The opinion is published, which means it protects more than one client. It holds that before the 2009 amendment a mortgage subsidiary was not a “financial institution” under section 1344, and that the statute requires an intent to obtain bank property through misrepresentations that actually reach the bank.
For anyone facing federal charges, the case is a reminder that the elements decide the case. Prosecutors have to charge the right crime, within the right window, with evidence that satisfies every element of it.
The Litson Team
Alex Little led the appeal.
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