Articles Tagged with Fraud

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BK Ct. ND IL EDIn re: William W. Yotis III, Chapter 13 Debtor
ND IL ED 2016, Bankruptcy No. 14-bk-02689

Anthony C. Gasunas, Plaintiff v.
William W. Yotis III, Defendant
ND IL ED 2016, Adversary No. 14-ap-00321

Decision: March 28, 2016 Judge: Schmetterer

This Adversary case filed in a Chapter 13 Bankruptcy relates to promissory note fraud between the debtor and creditor. It was tried before Judge Schmetterer. Plaintiff/Creditor Anthony C. Gasunas (“Gasunas”) filed the Complaint to determine dischargeability of the debt owed to him by Debtor/Defendant William W. Yotis, III (“Yotis”). Specifically, the Complaint alleged that Yotis made knowing and fraudulent misrepresentations to borrow money from Gasunas and that the judgment obtained in State Court was not subject to a dischargeable in accordance with §523(a)(2)(A) and (B), as well as §523(a)(4).

Facts

Shortly after Yotis and Gasunas met, Yotis disclosed that he had lost his license to practice law. But Yotis also did not disclose that he had been criminally indicted for forgery and charged in a civil suit filed by the Illinois AG with consumer fraud and deceptive business practices. Nord did Yotis tell Gasunas about any allegations of fraud and related misconduct prior to or after he obtained a series of loans from Gasunas. From 2009 to 2010 Yotis solicited loans from Gasunas totaling $52,345 and gave him a Promissory Note in return. When Yotis failed to pay him back, Gasunas filed suit in State Court and secured a judgment for $52,345 plus costs (the “Judgment”). During this period Gasunas and Yotis were friends – having been introduced through Yotis’ wife – Cavallo – and for that reason the Judgment was extended. Prior to meeting Yotis, Gasunas learned from Cavallo that Yotis was a disbarred Attorney, but had gotten his life back together as a salesman for a remodeling company. Cavallo also told Gasunas that Yotis had been incarcerated on what she said were false charges. Eventually, Yotis and Gasunas met and became friendly.

Yotis acknowledged signing a Promissory Note but denied making any misrepresentations and argued instead that any reliance by Gasunas on his alleged representations would not have been justifiable – a prerequisite for such a claim of nondischargeability. In fact, Yotis claimed that Gasunas knew the terms and debt recited in the Promissory Note were false when he signed it.

Following a trial the Court concluded that there had been a series of misrepresentations by Yotis in obtaining loans from Gasunas and that reliance on those misrepresentations was justifiable. Accordingly, Judgment was entered in favor of Gasunas on Count I under § 523(a)(2)(A); but on Count II found in favor of Yotis.
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Gasunas vs. Yotis, 14-321 (Nov.24) ND IL ED (J. Schmetterer)

The Facts

Yotis, a former Illinois Attorney, borrowed over $50,000 from his Client Gasunas using various tricks and subterfuge: from outright lies to misrepresentations and material omissions of fact designed to manipulate his “friend” and benefactor. Once he had the money, Yotis filed a Chapter 13 Bankruptcy.

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While Bernie Madoff serves out his 150-year sentence, the fight over how to satisfy his creditors rages on. Now, an infamous 2011 ruling by the Supreme Court limiting the power of bankruptcy courts may have a bizarre and unintended affect: many of the investors that recovered money when Madoff was first exposed may lose it (again) because the Bankruptcy Court may have overstepped its bounds by giving it to them in the first place. Confused yet?

Collateral Damage

Here’s the problem. Irving Picard, Trustee in the Madoff Bankruptcy, is now attempting to recoup funds lost to Madoff’s Ponzi schemes by means of fraudulent transfer suits. A Ponzi scheme is an illegal investment scheme that involves investors getting returns on their investment not based on profits but by subsequent investors. The enticement for new investors is usually short-term investments that offer an unnaturally high rate of return. Because it is not based on actual profits, it is destined for collapse. Madoff, on his way to becoming the largest financial fraud in U.S. history, created a Ponzi scheme that defrauded investors of billions of dollars. A fraudulent transfer suit is when in an effort to mislead creditors, the debtor transfers assets he knows he does not have. This is a fraudulent conveyance. The “suit” part is when a creditor, or a Bankruptcy Trustee, sues the recipients of the fraudulent conveyances demanding the funds back. In the case of Madoff and his Bankruptcy Trustee Picard, Picard is trying to augment the bankruptcy estate by suing people who originally invested in Madoff’s Ponzi scheme and received a “return” on that investment from Madoff. Picard wants the investors’ funds back, despite it being Madoff who created the fraudulent scheme in the first place. So if you are one of those investors, what do you do?

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Justia Opinion Summaries

In U.S. v. Robertson the 7th Circuit weighed in on the factors that should be taken into account when sentencing the perpetrators of non-criminal fraud – in this case, bankruptcy and mortgage fraud. Here the Defendants, a husband and wife, appeared to have reformed themselves and were contributing to their community when the matter came to a head.

Facts: The defendants bought up residential properties then sold them to straw men at inflated prices. The inflated bank loans were justified using false information about the buyers’ finances, down payment resources, and intentions about remaining in the properties. Before it collapsed, the scheme had resulted in 37 transactions that cost the lenders involved more than $700,000.

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Recently the 7th Circuit Court of Appeals heard a case arising from the Chapter

11 reorganization of a golf course; although their actual

decision is about the application of a seldom-used cause of action known

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