WINTER, Circuit Judge:
Felix Nkansah appeals from his conviction after a jury trial before Judge Rakoff for: (i) conspiracy to file false claims with the Internal Revenue Service ("IRS") in violation of 18 U.S.C. § 286 ("Count One"); (ii) filing false claims with the IRS in violation of 18 U.S.C. § 287 ("Count Two"); (iii) bank fraud in violation of 18 U.S.C. § 1344 ("Count Three"); (iv) aggravated identity-theft related to the bank fraud charged in Count Three in violation of 18 U.S.C. § 1028A(a)(1), (c)(5) ("Count Four"); and (v) identity-theft in violation of 18 U.S.C. § 1028(a)(7), (b)(1) ("Count Five").
We hold that there was insufficient evidence for appellant's conviction on Count Three and that his conviction on Counts Three and Four must, therefore, be vacated. We find appellant's other arguments to be without merit but do not address his claim regarding the substantive reasonableness of his sentence.
Viewing the evidence in the light most favorable to the government, see United States v. Chavez, 549 F.3d 119, 124 (2d Cir.2008), appellant was part of a group that, beginning in early 2005 through August 2008, stole names, dates of birth, and social security numbers from foster care, hospital, and childcare databases. This information was used to file thousands of fraudulent tax returns in the victims' names with fictitious income figures, resulting in tax refunds either sent as a check to the address of a group member or electronically deposited into a bank account controlled by a group member. The group, expecting about half the refunds to be approved by the IRS, filed for $2.2 million in fraudulent refunds and ultimately obtained $536,167. When a refund was received in the form of a check made out to an identity-theft victim, a group member would forge the payee's signature along with an endorsement over to the group member. The particular group member would deposit the check into a controlled bank account and would soon thereafter withdraw the money.
Appellant was linked to deposits at Commerce Bank, HSBC, and Bank of America. A search of his home and car revealed stolen identity information, tax refund correspondence to identity-theft victims sent to appellant's address, and a computer with a partially-completed tax refund made out in an identity-theft victim's name. Other evidence linked nearly 70 fraudulent tax returns to an IP address registered to appellant. On the same day, one of appellant's bank accounts received two federal tax refunds of several thousand dollars each. Evidence linked appellant to checks made out to identity-theft victims and endorsed over to a "William K. Arthur." These checks were deposited into a Bank of America account that appellant controlled under that name.
Appellant was arrested on September 9, 2008 and ultimately charged with the five
At trial, the government sought to show that the banks in which deposits were made by the group were at a risk of loss. Special Agent Peck of the Secret Service testified:
He also testified that Commerce Bank suffered financial losses "for not just Mr. Nkansah himself but the combined total in the case" as a result of the scheme. However, when pressed about specific losses suffered by banks as a result of appellant's specific use of accounts, Agent Peck could not confirm that such losses occurred. He also testified that while he thought that such banks bore the loss from accepting for deposit fraudulently obtained Treasury checks, he was "unsure" if that theory was correct.
During jury deliberations, the government inadvertently provided the jury with documents that had not been introduced into evidence. In particular, a standard form proffer agreement was included. Upon being notified of this by the government, the district court sent the courtroom deputy into the jury room, which had already been vacated for the evening, to retrieve the exhibit. It was still in the manila folder in which it had been originally housed. The folder was still inside the Redweld in which it had been given to the jury. Because of the circumstances surrounding the exhibit's location, the court concluded that it was likely that the jury had not seen the proffer agreement. The court further found that, even if the jury had seen the proffer, it contained nothing in evidence and, in any event, nothing material to any issue not already established in the case — usually from Nkansah's own testimony. Other documents mistakenly given to the jury were found to be similarly duplicative of evidence already before the jury.
We address each of appellant's challenges in turn.
We turn first to the sufficiency of the evidence regarding appellant's bank fraud conviction.
We note the familiar standard that sufficiency challenges are reviewed de novo, United States v. Leslie, 103 F.3d 1093, 1100 (2d Cir.1997), but a defendant challenging the sufficiency of the evidence bears a "heavy burden," United States v. Gaskin, 364 F.3d 438, 459 (2d Cir.2004) (internal quotation marks omitted). Appellant's claim, however, turns largely upon the legal definition of the defendant's state of mind that must be proven for purposes of a bank fraud conviction.
The federal bank fraud statute, 18 U.S.C. § 1344, provides:
Appellant knowingly used deception with regard to the bank accounts he controlled: (i) he opened them in the names of other people as well as the fictional William K. Arthur; and (ii) he deposited in the accounts checks fraudulently obtained from the United States Treasury causing the bank to seek reimbursement from the Treasury. Appellant argues, however, that the government was required to prove that he intended to victimize the banks as opposed to the Treasury. He claims that there was no evidence of such an intent or even that the banks had actually lost money. In essence, he argues that the banks were no more victims of his deceptions than a bank in which someone opens an account under a false identity to conceal funds from a spouse or business partner.
Appellant is correct that the bank fraud statute is not an open-ended, catch-all statute encompassing every fraud involving a transaction with a financial institution. Rather, it is a specific intent crime requiring proof of an intent to victimize a bank by fraud. See United States v. Rubin, 37 F.3d 49, 54 (2d Cir.1994). "[A] federally insured or chartered bank must be the actual or intended victim of the scheme." United States v. Stavroulakis, 952 F.2d 686, 694 (1992); see also United States v. Blackmon, 839 F.2d 900, 906 (2d Cir.1988) ("Where the victim is not a bank and the fraud does not threaten the financial integrity of a federally controlled or insured bank, there seems no basis in the legislative history for finding coverage under section 1344(a)(2)."); S.Rep. No. 98-225, at 377 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3517(bank fraud Statute designed to "assure a basis for federal prosecution of those who victimize these banks through fraudulent schemes.") Therefore, convictions for bank fraud are limited to situations where "the defendant (1) engaged in a course of conduct designed to deceive a federally chartered or insured financial institution into releasing property; and (2) possessed an intent to victimize the institution by exposing it to actual or potential loss." United States v. Barrett, 178 F.3d 643, 647-48 (2d Cir. 1999).
Our concurring colleague takes serious issue with the need to prove intent to harm a financial institution, albeit he concedes that this element is well-established in our caselaw. We note only that the government has argued none of the points he makes and begins its discussion of this issue with the following statement: "The bank fraud statute was enacted to `protect[] the financial integrity of [federally guaranteed financial] institutions, and ... assure a basis for Federal prosecution of those who victimize these banks through fraudulent schemes.' S.Rep. No. [98-225], [at] 377 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3517." Brief of Appellee at 16, United States v. Gyanbaah (Nkansah), 10-2441 (2d Cir. Apr. 13, 2011). The ensuing discussion then goes on to underline the need to prove the intent to harm a financial institution.
Appellant and other participants in the scheme discussed which banks would be the least likely to detect the scheme and/or the quickest to make the proceeds from the deposits available for withdrawal. While these concerns surely support an inference of an intent to avoid detection, on this record they have no probative value as to an intent to injure the banks. A bank's detection of appellant's depositing a fraudulently obtained tax refund check would lead to his arrest whether or not the bank was exposed to a loss. If the Treasury detected the fraud first, it would notify the bank, and the bank's efficiency at detection would be irrelevant. The conversations are, therefore, not probative of appellant's intent to injure the banks.
The government also relies on the banks' claimed exposure to losses resulting from appellant's scheme as circumstantial evidence of appellant's intent to victimize the banks. It relies in this regard on cases in which we have affirmed bank fraud convictions based on such exposure absent direct evidence of the defendant's
However, the widely understood exposure of a bank in such a case is only a fact sufficient to support an inference of the requisite state of mind. Someone may well forge a check believing that only the account holder will suffer a loss. The inference is, therefore, not mandatory, but permissible. Such a permissible inference cannot be extended to cases in which evidence of the state of mind is absent and the actual exposure of a bank to losses is unclear, remote, or non-existent. See United States v. Rodriguez, 140 F.3d 163, 169 (2d Cir.1998) (holding that when bank had no risk of loss because it was a holder in due course and where no other evidence showed intent, a bank fraud conviction must be overturned).
In the instant matter, there is no clear, much less well-known, exposure of the banks to loss. Indeed, until alerted by the Treasury to the scheme, the banks may well have been holders in due course with the risk of loss borne entirely by the Treasury. See id.
For example, appellant opened the William K. Arthur account by providing a false passport as identification. He used the account from October 2006 through at least May 2008. From October 2007 through April 2008 he deposited several fraudulently-obtained but genuine tax refund checks each month, often withdrawing the balance soon thereafter. The tax refund checks were made out to an identity-theft victim, and appellant would forge the victim's signature on the check with an endorsement over to William K. Arthur. Appellant would then deposit the check in the Arthur account. Some deposits were made by ATM; others by teller.
The checks were genuine Treasury checks. The signature of the final endorsee, William K. Arthur, was the authorized signature for the account and was the only signature the bank needed to verify to take the checks as a holder in due course. There is no evidence of the Treasury dishonoring the checks or seeking reimbursement from any of the banks. Our analysis does not depend on dispositively finding that Bank of America was not exposed to risk of financial loss.
Therefore, appellant's conviction on Count Three must be overturned.
Appellant next challenges his convictions on the ground that "highly incriminating extrinsic material" — his proffer agreement — was sent to the jury room during deliberations. He argues that the district court should have held an evidentiary hearing to determine the impact on the jury. However, appellant not only failed to ask for such a hearing but also agreed with the district court's handling of the issue. We, therefore, review only for plain error. To establish plain error, appellant must show
United States v. Marcus, ___ U.S. ___, 130 S.Ct. 2159, 2164, 176 L.Ed.2d 1012 (2010) (alteration in original) (internal quotation marks and citations omitted). Trial courts have "wide discretion in deciding how to pursue an inquiry into the effects of extra-record information," United States v. Hillard, 701 F.2d 1052, 1064 (2d Cir.1983), and "the trial judge's conclusions regarding the effect of the extra-record evidence on the jury are entitled to substantial weight," United States v. Hansen, 369 Fed.Appx. 215, 216 (2d Cir.2010) (citing United States v. Weiss, 752 F.2d 777, 783 & n. 2 (2d Cir.1985)).
There is no plain error. The district court determined that the mistaken submission of the proffer agreement did not affect appellant's substantial rights. The basis for that conclusion was that it was highly likely the jury did not view the proffer agreement before it was recovered and that, even if seen by the jury, its contents were either immaterial or already on the record and therefore harmless. We agree.
Appellant next argues that omission of the requisite interstate commerce element from the indictment on Count Five for identity-theft, see 18 U.S.C. § 1028(a)(7) & (c), requires reversal of that conviction. We review such an omission for "constitutional infirmities, most notably whether the alleged defect offends the Sixth Amendment right of the accused to be informed of the charges against him, the Fifth Amendment right not to be prosecuted without indictment by grand jury, or the Fifth Amendment protection against double jeopardy." United States v. Wydermyer, 51 F.3d 319, 324 (2d Cir.1995) (citations omitted). When, as here, the argument is raised only after trial, "we interpret the indictment liberally in favor of sufficiency, absent any prejudice to the defendant," id., and require "a clear showing of substantial prejudice to the accused — such as a showing that the indictment is so obviously defective that by no reasonable construction can it be said to charge the offense for which conviction was had," id. at 325 (quoting United States v. Thompson, 356 F.2d 216, 226 (2d Cir. 1965), cert. denied, 384 U.S. 964, 86 S.Ct. 1591, 16 L.Ed.2d 675 (1966)). We have consolidated these elements into a requirement that the omission is reversible only for plain error, the standard of which is discussed above. United States v. Cotton, 535 U.S. 625, 631, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002); United States v. Doe, 297 F.3d 76, 81-82 (2d Cir.2002).
Even if omission of the interstate commerce language constitutes error that is plain, it did not impact appellant's substantial rights. When "notice adequate to allow [a defendant] to prepare a defense" is provided, omissions in the indictment do not affect substantial rights. Doe, 297 F.3d at 88 n. 12. At least ten days before trial, the government submitted proposed jury instructions in which the issue of interstate commerce was specifically discussed with reference to the identity-theft count. Appellant's counsel neither objected to the proposed instruction nor expressed surprise at the interstate commerce language's inclusion. Even if this were the first time appellant's counsel became aware of the interstate commerce element, he had adequate time to address it before trial or to ask for additional time. There was therefore no harm to appellant's substantial rights.
Nor can appellant prevail on his argument that "[a] defendant is deprived of his right to be tried only on the charges returned by a grand jury when an essential element of those charges has been altered." When there is "overwhelming" evidence in support of the missing indictment element, the grand jury surely would have found the missing element, and the right to be tried on only charges returned by the grand jury is not violated. Cotton, 535 U.S. at 633, 122 S.Ct. 1781. The evidence of appellant engaging in interstate commerce via the internet in support of the identity-theft is overwhelming. For example, IP addresses registered to appellant were used to prepare fraudulent tax returns.
Finally, appellant argues that his sentence is unreasonable because of: (i) procedural unreasonableness in the district court's failure to use an "actual loss" measure — $536,167 — rather than a modified intended loss measure — over $1 million; and (ii) substantive unreasonableness because his sentence of 75 months was much greater than that of his co-defendants.
Sentences are reviewed for procedural and substantive unreasonableness
With regard to the claimed procedural unreasonableness, the Sentencing Guidelines provide that district courts are to use the greater of actual or intended loss. See U.S.S.G. § 2B1.1, cmt. n. 3(A). It was therefore not error for the district court to use intended loss, even if this number was greater than actual loss. Furthermore, a district court "need only make a reasonable estimate of the loss" given the "available information." U.S.S.G. § 2B1.1, cmt. n. 3(C). Appellant and his co-conspirators filed returns totaling $2.2 million, but a co-conspirator testified that about half the claims were expected to be rejected by the IRS. Therefore, an intended loss figure of over $1 million is not clear error, because it was reasonable to find that appellant expected half of the $2.2 million in filed returns, or $1.1 million, to succeed.
We need not address appellant's substantive unreasonableness argument at this time because the convictions on Counts Three and Four must be vacated and resentencing is required. Nevertheless, we note for purposes of future proceedings that several factors support a sentence for appellant that is in considerable excess of those of his co-defendants. Appellant went to trial, whereas his co-defendants agreed to plea deals. Also, appellant fled the country while on bail before trial, and, during the trial, he repeatedly lied. A significant disparity between appellant's and his co-conspirators' sentences is, therefore, to be expected.
For the foregoing reasons, we vacate the convictions on Counts Three and Four and remand for resentencing. Otherwise, we affirm.
GERARD E. LYNCH, Circuit Judge, concurring in part and concurring in the judgment in part:
I join fully in all of Judge Winter's thoughtful opinion for the Court except for part (a) of the discussion, addressing the sufficiency of the evidence supporting appellant's bank fraud conviction. As to that section, I concur in the result, agreeing that reversal is required by our prior holdings. I write separately, however, to express my view that those prior decisions are predicated on an unwarranted and unwise judicial injection of an offense element that has no basis in the statute enacted by Congress. As a result, our Court finds itself on the wrong side of a disagreement among the Courts of Appeals on the mental state necessary to sustain a federal bank fraud conviction.
Felix Nkansah conceived and executed a plan to steal money by lying to the United States government and to various banks. The plan proceeded in two steps. First, Nkansah and his co-conspirators stole personal information from real people and, using that information, submitted tax returns in their names to the Internal Revenue Service with falsified income and address information. As a consequence, he and his confederates received refund checks from the federal Treasury, made out to the payees in whose names they had filed the returns. Second, by presenting forged identification documents, Nkansah opened accounts in the names of the payees at several federally insured banks, deposited
When the scheme unraveled, Nkansah was indicted for (among other offenses) violating 18 U.S.C. § 1344. That statute provides:
Id. (emphasis added). On a plain reading of the second section of the statute, one would think it fits Nkansah's behavior like the proverbial glove. He devised a scheme to obtain money from the banks at which the accounts were opened by making false representations to them, and obtained cash that had been in the banks' hands — "under [their] custody or control." Indeed, the naive reader would think that the statute's drafter had carefully worded the second section to avoid creating any technical issues about whether the money that a fraudster obtained actually belonged to the bank, or whether the bank itself would suffer a financial loss; the crime is committed when a person schemes to lie to a bank (as Nkansah did, by representing himself to be another person when opening an account in that person's name and endorsing a check payable to that person), and thereby obtain funds that had been in the bank's custody and control (as Nkansah did, by obtaining a credit in the false account and withdrawing the funds thus made available in the form of United States currency that had been under the bank's control). Whether the money paid out to the scammer belonged to the bank, or an account holder against whose account the check was drawn, or a correspondent bank, or the drawer of a check against an account at some other bank should make no difference: under the plain words of the statute, if the defendant lies to a bank to get cash that is held by the bank, he would seem to run afoul of the law, regardless of whether it is that bank or some other party that ultimately bears the loss.
The majority rules today, however, that the naive reader is wrong, and that Nkansah did not violate § 1344, because (1) the statute incorporates a requirement that the defendant have an intent to harm the bank that he deceived into paying him, and (2) there is insufficient evidence that Nkansah had that intention. The naive reader would, I suppose, react differently to these two propositions. The first proposition — the legal assertion that intent to harm the bank is required — seems unwarranted, since no such requirement appears in the language of the statute. To the contrary, as discussed above, the statute's second section would appear to be written to avoid imposing such a requirement. If the statute were limited to the first section, and simply prohibited defrauding banks, this reading would be understandable, though hardly inevitable. "[T]o defraud a financial institution," id. § 1344(1), could well be read as meaning to harm the bank by taking its money. But the alternative
The second proposition, on the other hand — the factual assertion that Nkansah was not proven to have such an intent — seems only too obviously true. Whether or not the scheme actually inflicted loss on the bank at which he opened the accounts and negotiated the checks, it is hardly likely that a fraudster like Nkansah, who concocts a scheme for cashing forged or fraudulently obtained checks, harbored any animus against that particular bank, or cared whether the losses from his scheme fell on the bank that cashed his check or on the account holder against whose account the check is written — a result that, under the Universal Commercial Code, depends on the precise nature of his scheme. His intent is to profit — "to obtain any of the moneys, funds, credits, assets, securities, or other property" — not to inflict loss on any specific victim. Once it is decreed that an intent to harm the bank is a requirement of the statute, it would seem not only that some sorts of schemes are categorically beyond the reach of the statute (a result the majority acknowledges), but also that, if the requirement is taken seriously by judges and juries, and not evaded by some dubious improvised inferences, almost no fraudulent check-cashing scheme could successfully be prosecuted.
In fairness to today's majority, they did not invent this requirement. As demonstrated by Judge Winter's opinion, this Court has previously adopted the rule that an intent to harm the bank is a required element of a violation of § 1344. The root of the rule seems to be United States v. Blackmon, 839 F.2d 900, 904-07 (2d Cir. 1988), our first case to interpret § 1344 after its 1984 enactment. There, relying in large part on legislative history, this Court held that "[w]here the victim is not a bank and the fraud does not threaten the financial integrity of a federally controlled or insured bank, there seems no basis in the legislative history for finding coverage under section 1344(a)(2)." Id. at 906.
Even so, Blackmon makes clear that the requirement of an intent to harm a bank has been from the start a judicial construct, not expressed in or even suggested by the statutory language. For judges to impose such a requirement without textual basis demands a strong policy rationale — indeed, a rationale so powerful that we can
A judicially imposed requirement of intent to harm the bank would be a plausible example of such a compelling policy if it served to distinguish criminal from non-criminal behavior, as it does under 18 U.S.C. § 656, which covers various crimes against banks by their employees. But as applied in cases like this one, the requirement merely muddies the waters — or, as in this case, improperly exonerates a defendant of bank fraud — because in such cases it is clear that the defendant has perpetrated a crime, even though it may not be clear that the bank itself has sustained loss, or that the defendant understood or hoped that it would.
Under § 656, covering theft, embezzlement, and misapplication of bank funds by a bank officer or employee, we have insisted — without any express statutory language to guide us — that an intent to harm the bank be proven in order to sustain a conviction. That insistence is motivated in part by the drafting history of § 656: an express textual requirement of such an intent was edited out of the statute by a "technical" amendment, and we have kept it in order to preserve the substance of the prohibition. See United States v. Lung Fong Chen, 393 F.3d 139, 145 (2d Cir. 2004). But in misapplication cases, the requirement is also necessary to distinguish criminal from innocent conduct. For example, in United States v. Cleary, 565 F.2d 43, 45-47 (2d Cir.1977), we vacated a misapplication conviction because, although the defendant had violated internal bank rules in making a loan to a third party, the district court erred by excluding evidence that the loan recipient intended to repay the loan, which might have established that the defendant had not intended to harm the bank, but had instead just broken the bank's rules by making a risky loan. There was no evidence that the Cleary defendant had received bribes or kickbacks in exchange for making the loans, or otherwise engaged in furtive or illegal behavior, further suggesting that he had not had a wrongful intent. Id. at 47. See also United States v. Docherty, 468 F.2d 989, 995 (2d Cir.1972) (overturning a conviction under § 656 because of insufficient evidence of intent), abrogated on other grounds as recognized in United States v. McElroy, 910 F.2d 1016, 1025 (2d Cir. 1990); United States v. Evans, 42 F.3d 586, 589-91 (10th Cir.1994).
In such cases, we have properly enforced the missing intent requirement of § 656 in order to distinguish criminal from innocent behavior. A bank officer may sidestep or ignore bank rules, perhaps in exchange for a kickback or bribe, to facilitate a loan that the borrower has no intention, or no plausible prospect, of repaying. When the loan is a sham, harm to the bank is likely; the schemers have a criminal intent to obtain money wrongfully, at the expense of the bank. In other cases, however, a bank officer may evade the bank's internal rules in the good-faith belief that the borrower is willing and able to repay, and that the loan, though not authorized by the bank's formal loan guidelines, will actually be profitable for the bank. (In some cases, indeed, the bank officer defendant may even claim that, regardless of
Thus, to distinguish overly generous bankers from criminals, we properly hold under § 656 that criminal intent is shown only if the defendant had an intention to harm the bank. The formulation works in such cases because the essence of a wrongful intent in these situations is the intent to harm someone, and the only victim involved is the bank. The function of the rule is to separate criminals, who intend to inflict injury on another for gain, from persons who engage in deception in the good faith-belief that no one will suffer any loss. To be guilty of fraud in these circumstances, a defendant must intend not only to lie to the bank, or to apply its funds in an unauthorized way, but also to harm the bank. I have no quarrel with the proposition that a criminal intent to effect harm on someone is an element of a violation of § 1344 as well; it is inherent in the idea of a "scheme or artifice."
But our cases have not deployed the "intent to harm the bank" under § 1344 to distinguish criminal from non-criminal conduct, and an "intent to harm the bank" requirement certainly serves no such purpose in this case. There is no doubt that Nkansah had a criminally fraudulent intent. His goal was to get money to which he was not entitled, with no intention of paying it back. He obviously knew that, to produce his intended enrichment, someone would bear an unjustified loss. There is no doubt that Nkansah executed a scheme to obtain funds from the various banks by making false representations with criminal intent. The majority nonetheless applies the formulation, as we have done in prior cases, to require an intent to harm the bank. Here, the "intent to harm the bank" test distinguishes not between criminal and non-criminal conduct, but between (1) criminal conducted specifically intended to affect a bank, and (2) criminal conduct directed at a bank and for the purpose of obtaining money wrongfully from the bank by lying to the bank, but without regard for whether the bank or someone else will bear the brunt of the crime. In effect, the majority's application expands the mens rea requirement by attaching it not only to the element of harm that delimits criminality, but also to the jurisdictional element of the statute, where it serves no such purpose.
The requirement of a wrongful intent, as in the bank officer cases under § 656, is an appropriate instance of judicial implication of an unexpressed mental element into a statute, because the requirement of mens rea is so fundamental to our concept of criminal law that courts frequently read it into statutes in the absence of an express
A good example is United States v. Feola, 420 U.S. 671, 95 S.Ct. 1255, 43 L.Ed.2d 541 (1975), dealing with assault on a federal officer. In that case, the Supreme Court held that an intent to commit an assault was a required element of the offense of assaulting a federal law enforcement official under 18 U.S.C. § 111; that was the element that made the conduct wrongful. But the Court also held that it was not necessary to prove that the defendant intended to assault, or even knew he was assaulting, a law enforcement officer — let alone a federal officer, the element that subjects the crime to federal jurisdiction. See id. at 684-86, 95 S.Ct. 1255. Intentional assault, of anyone, is wrongful; that the victim happens to be a federal official creates federal legislative jurisdiction but does not make the act any more or less culpable.
One could, of course, argue — as the majority suggests this court did in Blackmon, 839 F.2d at 904-07 — that Congress, concerned about crime that could harm the solvency of federally insured banks, chose to punish only crimes specifically directed against such institutions. But this supposed policy choice would make little sense.
In any event, an "intent to harm the bank" requirement does not well serve the Congressional interest in protecting federally insured banks. The government cannot adequately protect federally insured banks from loss without being able to prosecute criminals who, while undertaking schemes to obtain property under the control of such banks, are ignorant of or insouciant about whom they will harm. A check fraud that is intended to harm a bank may in the end impose no costs on the institution if the schemer misunderstands who will be responsible for the loss, while one that the perpetrator believes will damage only some other party may in fact leave the bank liable for the loss. The goal of protecting federally insured financial institutions from loss may require a prohibition that extends more broadly than merely to crimes that are specifically intended to impose such loss.
Moreover, given the difficulties of proving such intent, injecting such a requirement will make it difficult to prosecute crimes that Congress surely would have wanted to cover. Indeed, if the majority's rule were applied seriously by judges and juries, prosecutions for bank fraud in all cases involving checks would be very difficult. Very few criminals passing checks that variously involve forged payee endorsements, forged drawer signatures, stolen or fraudulently obtained checks, and the like, who quite clearly have the specific intent to wrongfully obtain money that is in the bank's custody or control, have any knowledge of the rules of law that govern who bears the risk of loss in the complex system by which negotiable instruments are paid. Still less do most of them care. The Hollywood version of Clyde Barrow may have asked, while robbing a bank, whether cash was the bank's or still belonged to the would-be depositor, and left it to the poor farmer when told it was his.
The majority tries to avoid this reality by suggesting that in some cases an intent to harm the bank can be reasonably inferred where the law provides that the bank will bear the loss, and the rule of law is "well-known" or "widely understood." See Maj. Op. at 749-50. The majority provides no empirical evidence that any rule of law governing the payment system is "well-known" to (let alone "well understood" by) anyone but a small cadre of bankers, banking lawyers, and law professors who teach courses in negotiable instruments.
A cynic might contend that so long as judges will enforce today's rule by allowing an inference of anti-bank animus drawn from rules of banking law to defeat motions for acquittal for insufficient evidence, prosecutors can safely charge bank fraud in cases in which the bank would in fact bear a risk of injury, and juries can be counted on to convict defendants who are shown to have engaged in clearly wrongful conduct, without worrying much about whether those defendants had actually been proved beyond a reasonable doubt to have actually intended a loss to the bank. It is perhaps true that few defendants would be so bold as to argue to a jury, "I intended to defraud, but I hoped and thought that the victims would be the bank's customers, not the banks." I am not cynical, however, about jurors' ability and inclination to follow their instructions and base their verdicts on the law and the evidence, and therefore assume that many jurors will have a reasonable doubt about the dubious proposition that the defendant in fact knew or intended that the bank to which he lied, rather than some other party, would bear the cost of his scheme. But even if I thought otherwise, I would still think it an odd legal system that defined liability rules that could only be practicable on the theory that judges and juries will take short-cuts in applying them.
The mischief of the rule is limited in this case. Because the loss from Nkansah's
In other cases, the requirement of a specific intent to injure a bank may have more serious consequences, making federal prosecution of some fraudulent check schemes impossible. Worse, the distinction between those that are and those that are not subject to prosecution under § 1344 is entirely arbitrary.
One need not invent hypothetical examples to illustrate the arbitrariness of the rule. United States v. Laljie, the case that in my view controls this one and compels my concurrence in reversing Nkansah's bank fraud convictions, amply demonstrates the point. In Laljie, the evidence permitted the jury to find the defendant, who was secretary to one Schmeelk and had access to his checkbook, stole money by (1) physically altering checks, made payable to Cash and signed by Schmeelk, to increase the amounts, pocketing the difference between the amounts Schmeelk expected and the amount the bank paid, and (2) taking checks that Schmeelk had pre-signed in blank for payments to vendors, and writing in as payee a company controlled by her husband, thus diverting the funds to her own use. We upheld convictions on bank fraud counts based on the altered-amount checks, on the theory that because the bank should have noticed the physical alterations on the checks, the bank would be liable to Schmeelk for paying the increased amounts. 184 F.3d at 190-91. Apparently crucial to the holding was the fact that the alterations "were sufficiently visible to call into question the checks' authenticity, putting the bank on notice that the maker might have a defense against it and preventing the bank from enjoying the status of holder in due course." Id. at 190. But we vacated the convictions based on the second scheme, because the bank would not be liable for paying an apparently legitimate check that bore Schmeelk's actual signature. Id. at 191. With respect, this makes little sense. In my view, Laljie was equally guilty of violating § 1344 for both schemes, because in each case she made false representations to the bank (misrepresenting the amounts of the checks in the first scheme and misrepresenting that the checks had been made payable by Schmeelk to the payee she had fraudulently inserted in the second
However unfortunate the consequences of today's decision might be, I agree that, given Laljie and, to a lesser extent, the dictum in Blackmon, its outcome is required by the law of this Circuit. Nonetheless, I believe that this decision reverses a well-deserved conviction, and perpetuates a potential loophole that could make future prosecutions more difficult. The precedents upon which the Court relies today ignore the statute's plain language and are unsound as a matter of policy.
Although § 1344 has produced much litigation in the Circuits and many separate opinions by learned appellate judges, federal courts do not agree on the mental state necessary to support a conviction under § 1344, nor on the relationship between the statute's two subsections. See, e.g., United States v. Staples, 435 F.3d 860, 866-67 (8th Cir.2006) (discussing difference of opinion among Circuits); United States v. Everett, 270 F.3d 986, 990 n. 3 (6th Cir.2001) (same). Some Circuits hold, as we do, that an intent to harm the bank, or at least expose it to risk, is required. See, e.g., United States v. Odiodio, 244 F.3d 398, 401 (5th Cir.2001); United States v. Davis, 989 F.2d 244, 246-47 (7th Cir. 1993). But other Circuits hold a variety of other views. For example, the First Circuit, overruling earlier precedents, has held in a unanimous en banc decision that under either subsection, § 1344 requires only an intent to defraud a bank, and not an intent to harm a bank. United States v. Kenrick, 221 F.3d 19, 26-29 (1st Cir. 2000).
Thus, while the force of our Court's precedent compels me to concur in the judgment of the Court, I am firmly convinced that we are on the wrong side of the conflict among the circuits on the issue that controls this case, and I hope and trust that when the Supreme Court sees fit to resolve the conflict, it will reject our Circuit's rule.
The present issue arises only because the U.S. Treasury is not within the statute's definition of a "financial institution." See 18 U.S.C. § 20 (listing exhaustively the entities that qualify as financial institutions for the purposes of title 18). Our decision leaves untouched the caselaw allowing a finding of intent to injure where the liability of drawee banks is clear, thereby fulfilling the congressional intent to protect banks from check-kiting schemes. See S.Rep. No. 98-225, at 378 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3518. Moreover, we leave untouched the statute's protection of banks from fraudulent practices in the securing of loans.
Id. at 62.
