09-3098, 09-3482 & 09-3681 U.S. v. Green

By: WISCONSIN LAW JOURNAL STAFF//August 9, 2011//

Listen to this article

Sentencing
Amount of loss

At a sentencing for fraud involving fraudulently obtained mortgages, credit bids should not be credited against the loss.

“At his sentencing hearing, Green introduced evidence showing that some of the properties involved in the fraud were sold at public auction and requested that proceeds from the sales, at which the lenders were the highest bidders, be credited against the loss. The district court rejected Green’s calculations. Green re-asserts his argument on appeal, claiming that the district court improperly calculated the loss amount by not using the prices at which the lenders obtained title to the properties at the public auctions.”

“Green’s suggested calculation misses the mark. Where a lender forecloses and acquires the property at public auction by making a credit bid (i.e., a bid that offers to cancel the outstanding principal, interest, and related fees in return for title to the property), the credit bid is not a reliable measure of the actual market value of the property. See generally River Road Hotel Partners, LLC v. Amalgamated Bank, ___ F.3d ___, ___, 2011 WL 2547615, at *7 (7th Cir. June 28, 2011); In re Philadelphia Newspapers, LLC, 599 F.3d 298, 320-21 (3d Cir. 2010) (Ambro, J., dissenting) (explaining credit bidding in Chapter 11 bankruptcy context). In a typical fraudulent mortgage scheme, a credit bid is highly likely to overvalue the property. The whole point of the fraud was to fool the lender into lending far more than the market value of the property, and then to disappear, leaving the lender with a property worth far less than the loan. Using a credit bid based on the fraudulently inflated loan amount to measure loss would surely understate the actual loss. Thus, in this situation, it would have been an error for the district court to use Green’s proposed method of calculating loss.”

Affirmed.

09-3098, 09-3482 & 09-3681 U.S. v. Green

Appeals from the United States District Court for the Northern District of Illinois, Bucklo, J., Hamilton, J.

Full Text

Sentencing
Amount of loss
At a sentencing for fraud involving fraudulently obtained mortgages, credit bids should not be credited against the loss.
“At his sentencing hearing, Green introduced evidence showing that some of the properties involved in the fraud were sold at public auction and requested that proceeds from the sales, at which the lenders were the highest bidders, be credited against the loss. The district court rejected Green’s calculations. Green re-asserts his argument on appeal, claiming that the district court improperly calculated the loss amount by not using the prices at which the lenders obtained title to the properties at the public auctions.”
“Green’s suggested calculation misses the mark. Where a lender forecloses and acquires the property at public auction by making a credit bid (i.e., a bid that offers to cancel the outstanding principal, interest, and related fees in return for title to the property), the credit bid is not a reliable measure of the actual market value of the property. See generally River Road Hotel Partners, LLC v. Amalgamated Bank, ___ F.3d ___, ___, 2011 WL 2547615, at *7 (7th Cir. June 28, 2011); In re Philadelphia Newspapers, LLC, 599 F.3d 298, 320-21 (3d Cir. 2010) (Ambro, J., dissenting) (explaining credit bidding in Chapter 11 bankruptcy context). In a typical fraudulent mortgage scheme, a credit bid is highly likely to overvalue the property. The whole point of the fraud was to fool the lender into lending far more than the market value of the property, and then to disappear, leaving the lender with a property worth far less than the loan. Using a credit bid based on the fraudulently inflated loan amount to measure loss would surely understate the actual loss. Thus, in this situation, it would have been an error for the district court to use Green’s proposed method of calculating loss.”
Affirmed.
09-3098, 09-3482 & 09-3681 U.S. v. Green
Appeals from the United States District Court for the Northern District of Illinois, Bucklo, J., Hamilton, J.

TAGS: 7th Circuit Digest, Criminal Digest, Sentencing Digest

http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=09-3098_002.pdf

Select Region or Brand

Upcoming Event