Kevin Loughrin v. United States, USSC No. 13-316, 2014 WL 2807180 (June 23, 2014), affirmingUnited States v. Loughrin, 710 F.3d 1111 (10th Cir. 2013); Scotusblog page (includes links to briefs and commentary)Resolving an issue that split the federal circuit courts, the Supreme Court holds that the section of the federal bankfraud statute that prohibits “knowingly execut[ing] a scheme … to obtain” property owned by, or under the custody of, a bank “by means of false or fraudulent pretenses,” 18 U.S.C. § 1344(2), requires only that the defendant intend to obtain bank property and that this end is accomplished “by means of” a false statement. Nothing in the statute requires proof of intent to defraud or deceive a bank.Loughrin was charged under § 1344(2) based on a scheme in which he stole checks, forged the account holder’s signature, and used them at Target to buy merchandise, some of which he’d then return for cash.

York construction company owned by Louis Ciminelli (“Ciminelli”), who together worked to ensure that the company received preferential treatment from New York’s “Buffalo Billion” initiative, an investment program administered through a nonprofit affiliated with the State University of New York (“SUNY”) that aimed to invest a billion dollars in upstate development projects. Essentially, Ciminelli’s company allegedly paid to ensure that the lobbyists would tailor any requests for proposal (“RFPs”) issued by the program to Ciminelli’s company’s candidacy, and guarantee it preferred status for development funds.The individuals involved were indicted on 18 counts, including wire fraud (18 U.S.C. § 1343). The wire fraud statute reads in relevant part:Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises[.]For comparison, importantly, the bank fraud statute (18 U.S.C. § 1344) reads: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[.]When prosecuting the case, DOJ relied on the “right to control” theory of fraud enshrined in Second Circuit precedent – allowing a prosecutor to establish wire fraud “by showing that the defendant schemed to deprive a victim of potentially valuable economic information necessary to make discretionary economic decisions.” Consistent with that theory, the jury was provided with two key instructions on application of the statute:that Section 1343’s use of the term “property” “includes intangible interests such as the right to control the use of one’s assets[,]” and that the jury could find that defendants harmed this right if the nonprofit

On Monday April 25, the U.S. Supreme Court granted certiorari in United States v. Shaw, a closely watched case out of the Ninth Circuit addressing the bank fraud statute, 18 U.S.C. § 1344. That statute has two subsections, the first of which criminalizes schemes “to defraud a financial institution.”

Question presented:Whether, in the bank-fraud statute, 18 U.S.C. § 1344, subsection (1)’s “scheme to defraud a financial institution” requires proof of a specific intent not only to deceive, but also to cheat, a bank, as nine circuits have held, and as petitioner argued here.Lower court opinion: United States v. Shaw, 781 F.3d 1130 (9th Cir. 2015); USSC docket; Scotusblog pageAnother circuit split, another cert grant. The split in this case is about the mens rea required to be found guilty of bank fraud under 18 U.S.C. § 1344(1).

Lawrence Shaw v. United States, USSC No. 15-5991, 2016 WL 7182235 (December 12, 2016), vacating and remandingUnited States v. Shaw, 781 F.3d 1130 (9th Cir. 2015); Scotusblog page (including links to briefs and commentary)A unanimous Supreme Court holds that to be found guilty of bank fraud under 18 U.S.C. § 1344(1), which prohibits “knowingly execut[ing] a scheme … to defraud a financial institution” does not require proof the defendant intended that the financial institution—rather than, say, one of its depositors—be the principal victim of the fraud.Shaw obtained account numbers of a customer of Bank of America and used them to transfer money from the customer’s account to accounts Shaw controlled. He argued the words “scheme to defraud a financial institution” in § 1344(1) require the Government to prove that the defendant had a specific intent not only to deceive, but also to cheat, the bank, rather than a non-bank third party.

Thus, the defendant could not receive a sentencing guideline gun enhancement pursuant to his possession of one cache of drugs (and a gun), and a § 942(c) sentence in connection with his possession of the other cache of drugs.United States v. Lilly, 983 F.2d 300 (1st Cir. 1992)In an effort to obtain one bank loan, the defendants submitted a number of fraudulent documents. This amounted to one scheme to defraud a bank under 18 U.S.C. §1344, not several schemes associated with each set of documents.United States v. Seda, 978 F.2d 779 (2d Cir. 1992)An indictment charging the defendant in two separate counts with bank fraud (18 U.S.C. §1344) and making a false statement to a bank in connection with a loan application (18 U.S.C. §1014) was multiplicitous.

Lost amid the flurry of the Supreme Court’s end of term decisions on recess appointments, cell phone privacy and contraception coverage is the Court’s dip into the federal bank fraud statute, 18 U.S.C. § 1344, in Loughrin v. United States. We no doubt share your surprise that the Twitterverse didn’t take to the streets in uproar over the Loughrin decision.

Loughrin never went to a bank or engaged a bank in any way, although the checks he altered were or would have been drawn on bank funds. He was convicted of bank fraud under the second clause of the federal bank fraud statute, 18 U.S.C. § 1344, which provides that: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; shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. At issue on appeal were the elements required to satisfy the second clause of § 1344.

Question Presented: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)DocketScotusblog pageAre 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

In this case, the defendant altered stolen checks to make purchases at a Target store. He would then return the purchases for cash. The 10th holds that to convict the defendant of bank fraud under 18 U.S.C. § 1344(2) the government did not have to prove he intended to defraud a financial institution. All it had to do was show he obtained by false pretenses money that was under the custody or control of a bank.