Whether the government must prove that the defendant intended to defraud a bank and expose it to risk of loss in every prosecution under 18 U.S.C. § 1344.
Lower court decision: United States v. Loughrin, 710 F.3d 1111 (10th Cir. 2013)
Are you defending someone charged with federal bank fraud under 18 U.S.C. § 1344? If you are, you’ll want to keep an eye on this case. It will settle a split between the federal circuit courts about how to interpret the two different subsections of the statute, which reads:
Bank Fraud Whoever knowingly executes, or attempts to execute, a scheme or artifice
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises.
Some circuits say that regardless of whether the defendant is charged under subsection (1) or (2), § 1344’s intent element imposes two requirements: First, the defendant intended to defraud a covered financial institution–which means it is not enough the defendant intended to defraud a non-bank victim even if a bank was involved in the scheme in some way; second, the defendant’s scheme exposed the bank to a risk of loss of its property or property under its custody or control (e.g, customer deposits)–which means it is insufficient that a defendant lied in some way to a bank if he did not intend to expose the bank (as opposed to some other victim) to a risk of financial harm. See, e.g., United States v. Kenrick, 221 F.3d 19, 29 (1st Cir. 2000). The Seventh Circuit seems to have adopted this approach. Bressner v. Ambroziak, 379 F.3d 478, 482 (2004) (“An essential element of bank fraud is ‘intent to deceive a bank in order to obtain from it money or other property’” (quoting United States v. Lane, 323 F.3d 568, 583 (7th Cir. 2003) (citing Kenrick, 221 F.3d at 545))).
Other circuits–including the Tenth Circuit in this case–hold that a charge under subsection (2) requires only intent to defraud someone and a connection between the fraudulent scheme and a financial institution. The defendant here was convicted based on a scheme in which he stole checks from other persons’ outgoing mail, altered the payee on the checks so they appeared to be made out to Target, purchased merchandise using the altered checks, and then returned the merchandise for cash. This scheme defrauded Target, not a bank, but under Tenth Circuit precedent that was good enough.
The Supreme Court will now resolve whether § 1344 is violated when a defendant defrauds a third party using a scheme that has a nexus to a financial institution but doesn’t create a risk of loss for the institution. In so doing the Court will either affirm or overturn Seventh Circuit law. Federal practitioners, stay tuned.