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Wilson v. Illinois Department of Financial & Professional Regulation

Court of Appeals of Illinois, First District, Fifth Division

May 24, 2013

CHRIS WILSON, Plaintiff-Appellant,
v.
ILLINOIS DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, DIVISION OF BANKING OF THE ILLINOIS DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION, and Manuel Flores, Director of the Division of Banking of the Illinois Department of Financial and Professional Regulation, Defendants-Appellees.

Appeal from the Circuit Court of Cook County No. 11 CH 19462 Honorable Thomas R. Allen, Judge Presiding

Justices Howse and Taylor concurred in the judgment and opinion.

OPINION

McBRIDE PRESIDING JUSTICE

¶ 1 The issue in this appeal is whether a residential mortgage loan originator who was disciplined by the State of Illinois in 2007 for federal tax fraud convictions and then relicensed at the State's discretion in 2007, 2008, and 2009, became permanently disqualified from relicensing by a 2009 amendment to the Residential Mortgage License Act of 1987 (210 ILCS 635/7-3 (West 2010)) (Mortgage License Act) which indicates licenses "shall not" be issued to anyone convicted at any time of a felony involving fraud or dishonesty. Petitioner Christopher Mark Wilson contends the denial of his 2010 license renewal application by respondent Illinois Department of Financial and Professional Regulation (Department) due to his federal tax fraud convictions violates his state and federal constitutional rights because the 2009 law is being applied retroactively; is an ex post facto law; and has taken a property interest without just compensation. He also contends he is being punished a second time for the same conduct in violation of the doctrine of res judicata.

¶ 2 The relevant facts are straightforward and undisputed. Wilson, a resident of Lombard, Illinois, was first issued a residential mortgage loan originator license by the State of Illinois in 2005. The Mortgage License Act defines a "loan originator" as "any person who, for compensation or in the expectation of compensation, either directly or indirectly makes, offers to make, solicits, places, or negotiates a residential mortgage loan" and further specifies that no person "shall engage in the business of *** originating *** residential mortgage loans without first obtaining a license." 205 ILCS 635/1-4(hh) (West 2010) (statute defining terms used in Mortgage License Act); 205 ILCS 635/1-3(a) (West 2010) (statute stating scope of Mortgage License Act and necessity of license). Wilson renewed the license without incident for the year 2006 – the same year in which he entered a guilty plea in the United States District Court for the Northern District of Illinois and was convicted of the federal felony crimes of tax fraud in 2001 and impeding the Internal Revenue Service. See 26 U.S.C. § 7206(1) (2004) (statute regarding fraud and false statements) and 26 U.S.C. § 7212(a) (2004) (statute regarding obstruction of administration of internal revenue laws). Wilson was ordered to pay restitution for taxes owed and a $1, 500 fine and put on two years' probation. He indicates the tax arrearage was $43, 000, but the addition of interest and penalties increased his debt to $107, 000. He also indicates he fully complied with the sentence.

¶ 3 Wilson disclosed the federal convictions when he applied for license renewal in 2007. He and the Department then agreed to disciplinary consequences that were documented in a consent order. The consent order indicates the convictions were potential grounds for denying renewal, but Wilson's annual license would be renewed and then immediately suspended for 30 days and he would be subject to probation for two years. See 205 ILCS 635/7-1 (West 2006) (statute indicating loan originators must be registered and authorizing the creation of rules and regulations prescribing relevant qualifications, fees, examinations, education, supervision, enforcement, and other criteria); 38 Ill. Admin. Code 1050.2110(6) (administrative rule indicating applicants must disclose any criminal conviction or adverse civil judgment involving monies, breach of trust, moral turpitude, or misfeasance or malfeasance). Wilson complied with the terms of probation and his license was renewed for the years 2008 and 2009.

¶ 4 Around this same time, however, federal and state laws were enacted to combat extensive fraud and predatory lending practices in the subprime residential mortgage market. A new federal law known as the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 or "SAFE Act" imposed background and education standards and required fingerprinting and issuance of unique, life-time identifiers to prevent unscrupulous mortgage loan originators from simply moving from jurisdiction to jurisdiction. 12 U.S.C. § § 5101-5116 (2010); B. Gray, The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, 31 Rev. Banking & Fin. L. 51 (Fall, 2011). Among the SAFE Act's "minimum standards for licensing and registration" for mortgage loan originators was that:

"[t]he applicant has not been convicted of, or pled guilty or nolo contendre to, a felony in a domestic, foreign, or military court:

(A) during the 7-year period preceding the date of the application for licensing and registration; or
(B) at any time preceding such date of application, if such felony involved

an act of fraud, dishonesty, or a breach of trust, or money laundering." Consistent with the SAFE Act, Illinois law was amended effective July 31, 2009, to preclude the Department from issuing a mortgage loan originator license unless:

"[t]he applicant has not been convicted of, or pled guilty or nolo contendre to, a felony in a domestic, foreign, or military court:
(A)during the 7-year period preceding the date of the application for licensing and registration; or
(B)at any time preceding such date of application, if such felony involved an act or fraud, dishonesty, or a breach of trust, or money laundering[.]" Pub. Act. 96-112 ยง 5 (eff. ...

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