Posted On Tuesday, October 22, 2013
The U.S Supreme Court will hear an appeal brought by a straw buyer in a mortgage fraud scheme challenging a trial court’s interpretation of the scope of restitution under the Mandatory Victims Restitution Act. The issue involved is one which has divided the circuit courts.
In the case of Benjamin Robers v. United States, Case No. 12-9012, Robers, who pleaded guilty in 2010 to conspiracy to commit wire fraud in connection with the mortgage fraud scheme, is challenging the district court’s $218,952.00 restitution order arguing that the Court improperly interpreted the MVRA, holding him responsible for the decline in real estate values during the course of the scheme. The Seventh Circuit upheld the district court’s restitution order.
The mortgage fraud scheme to which Robers pled guilty, began in 2004 and involved more than fifteen houses in Walworth County, Wisconsin. Robers admitted that he signed mortgage documents for two properties seeking loans based on false and inflated income and assets, and based on his claim that he would live in the houses and pay the mortgages. Eventually, the loans went into default and the real estate was foreclosed upon and resold.
Robers was eventually sentenced to three years probation and ordered to pay $218,952.00 in restitution to the victims – a mortgage lender and a mortgage insurance company. Robers challenged the restitution order claiming that the court improperly calculated the “offset value” of the property that was returned. He argued further that the MVRA required the court to determine this value based on fair market value of the real estate on the date the victim lenders obtained title to the houses. Since that was the date when the property was returned.
On the other hand, the government argued that the foreclosure on the properties did not constitute return of the property. According to the government, the return occurs only when the collateral real estate is resold and the “offset value” must be determined based on the eventual cash proceeds received in the sale.
The U.S. appellate courts are divided on this issue. The Second, Fifth and Ninth Circuits have adopted Robers’ position in similar cases. The Third, Eighth and Tenth Circuits side with the government on the issue. It will be up to the U.S. Supreme Court to resolve this circuit split.
Posted On Monday, October 21, 2013
On October 18, 2013, the Ninth U.S. Circuit Court of Appeals will hear arguments from AU Optronics Corp. (“AUO”) and two of its executives attempting to overturn their convictions for fixing the price of liquid crystal display panels (“LCDs”). The case, USA v. AU Optronics Corp., et al., case numbers 12-10492, 12-10493, 12-10500 and 12-10514 (9th. Cir. )., could determine how far U.S. antitrust law can reach to tackle price fixing activities that occur outside the United States.
In 2012, a federal jury in San Francisco convicted AUO, its U.S. subsidiary, former president and former vice-president of participating in a global plot to fix the price of LCDs. AUO was fined $500 million and the two executives were sentenced to three (3) years in prison. The defendants have appealed their convictions to the 9th Circuit arguing that the U.S. Department of Justice failed to establish why the Foreign Trade Antitrust Improvements Act did not apply to the case, given the fact that the bulk of the alleged price fixing activity took place overseas. The Foreign Trade Antitrust Improvements Act limits the foreign reach of the Sherman Act except where the conduct has a “direct, substantial and reasonably foreseeable effect” on U.S. commerce. The defendants have also argued that the convictions should be overturned based on 9th Circuit precedent that the per se antitrust standard does not apply to foreign conduct. Instead, they argue, that the trial court should have applied the rule of reason test to the alleged price fixing. The rule of reason test would have required the government to establish that the harm caused by the conduct outweighed any pro-competitive benefits.
In response, the Department of Justice argued that the Sherman Act does in fact reach the defendants’ conduct because a portion of the price fixing plot took place in California and because the conspiracy among the defendants harmed U.S. consumers. The DOJ argued that defendants cannot simply “off-shore” their conspiracy meetings to put their conduct outside the reach of U.S. antitrust laws. Further, the DOJ maintained that the per se antitrust standard, not the rule of reason test, applies to defendants’ conduct.
AUO manufactured its LCDs outside the U.S. Since most manufacturing takes place beyond U.S. borders today, the Court’s decision will have significance in determining the reach of U.S. antitrust laws to overseas manufacturing. Stay tuned.
