The Supreme Court justices seemed disinclined to agree with a defendant’s claim that he should not have been convicted of bank fraud because he did not intend to take money from the bank. The petition for certiorari in Shaw v. U.S. asked the Court whether proving a person had a scheme to defraud a bank in violation of 18 U.S.C. §1344(a)(1) requires proving that he intended that the bank suffer the loss from the fraud. In today's oral arguments, the defendant also challenged the specific wording of one jury instruction that defined the offense, although it’s unclear if that argument was included in his petition.
The bank fraud statute says that:
Whoever knowingly executes, or attempts to execute, a scheme or artifice—commits bank fraud.
- to defraud a financial institution; or
- 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;
Shaw was convicted of violating 18 U.S.C. §1344(a)(1) by using a fraudulent PayPal account to drain a Bank of America customer’s bank accounts. As a result of the scheme, the customer and PayPal together lost more than $275,000, but Bank of America was unharmed.
Ninth Circuit decision. That scheme violated 18 U.S.C. §1344(a)(1), according to the U.S. Court of Appeals for the Ninth Circuit. A scheme to defraud a bank does not require an intent to take money that belongs to the bank (see U.S. v. Shaw).
Bank property interest. Deputy Federal Public Defender Koren Bell began by arguing that bank fraud requires both an intent to deceive the bank and an intent to harm some property right of the bank. However, she had to concede that a possessory right is a property right.
Justice Breyer queried whether the defendant’s argument would imply that a con man who stole insured property would have defrauded the insurance company but not the property owner. Referencing current events (and implying some skepticism as well), he asked “Even Kardashian’s thief, if there is one, believes that all that jewelry is insured. Indeed over insured. So it’s not theft?”
Bell attempted to clarify her argument by focusing on the defendant’s intent, asserting that 18 U.S.C. §1344(a)(1) would be violated only if his intent was to victimize the bank. Otherwise, the proper charge would have been under 18 U.S.C. §1344(a)(2). In fact, she conceded that the scheme alleged would have violated 18 U.S.C. §1344(a)(2).
Jury instruction. Bell also asserted that the jury instructions incorrectly described the elements of the crime. The jury was improperly told that the government only had to prove the defendant intended to deceive the bank. The instruction should have made clear that a crime also depended on his intent to deprive the bank of property.
The specific instruction told the jury to look for “Intent to deceive, cheat, or deprive a financial institution of something of value.” Bell argued that this separated “deceive” and “cheat” from “deprive,” allowing the defendant to be convicted based on an intent to deceive alone.
Bank's possessory interest. Arguing for the government, Assistant to the Solicitor General Anthony Yang first made clear that an intent to deceive a bank alone is not enough to be a violation of 18 U.S.C. §1344(a)(1). The statute requires that the bank be deprived of some property interest.
According to Yang, whether the defendant intended to take money from the bank or the customer was irrelevant. What mattered was that he had an intent to deceive and, by that deception, to commit fraud. The necessary intent to defraud the bank would be satisfied by his intent to deprive the bank of its possessory interest in the money, regardless of who owned the money.
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