Cloud was convicted of multiple counts of fraud and money laundering for acts committed in a mortgage fraud conspiracy. He argued on appeal that certain evidence was wrongly admitted, that his money laundering conviction must be vacated, his loss amount for sentencing was wrongly calculated and his reimbursement order should be vacated. The panel affirmed in part and reversed in part. It held the victim impact and certain statements were properly admitted and in any event the admission was harmless. The panel vacated all but one of the money laundering counts holding that, under circuit and Supreme Court precedent, the payments to other conspirators were essential expenses of the scheme and thus could not forma basis for a separate money laundering conviction. It did affirm a money laundering count premised on the underlying conspiracy. The panel upheld the loss amount holding the effect of foreclosures on surrounding homeowners and the minimal property management provided by Cloud was sufficient to justify the amount found by the trail court. The panel finally vacated the attorney fee order as the trial court failed to identify the income or other funds which could be used to pay the reimbursement.
Delebreau defaulted on a mortgage secured by a deed of trust. They defaulted and the note was accelerated. They filed suit alleging violations of West Virginia’s unfair business practices act. The trial court dismissed on statute of limitations grounds and the panel affirmed. It held that the date of the last scheduled payment for limitations purposes is the date of the acceleration. It based this on the plain language of the statute and the underlying policy of encouraging timely filing of suits.
Starnes and the other shareholders in a trucking company sold the assets and shares to provide retirement funds. Contrary to the sale agreement, purchaser did not keep the company as an ongoing enterprise but sold it to a third party. That party claimed no taxes were due as losses offset income. The commissioner disagreed and levied a deficiency. After failing to collect the amount owed, the commissioner brought an administrative action against the former shareholders. The tax court held North Carolina law applied to determine if liability could be asserted against the former shareholders. It determined the answer was no and entered judgment. The panel, 2-1, affirmed. The majority held state law governed the liability determination and assumed the federal requirement of being a “transferee” was met. The majority held that the series of transaction were not a “transfer” for North Carolina fraudulent transfer act purposes as the correct timeframe is the transfers constituting the sale of the company, not the subsequent transactions between buyer and the third party. The majority held that while the former shareholders were on inquiry notice as to the possibility the buyers would use the company for tax avoidance, the tax court properly found reasonable inquiry would not have revealed whether or not that was the motive for the purchase. Thus, there was no basis to set aside the transfer under the fraudulent transfer act or under common law. The dissent argued that the former shareholders entered into a fraudulent agreement to avoid taxes and should be liable based on substance of the transaction which it characterized as a liquidation of the company.