Source: https://caselaw.findlaw.com/us-9th-circuit/1695589.html
Timestamp: 2019-04-24 19:18:01
Document Index: 324430663

Matched Legal Cases: ['§ 1344', '§ 1344', '§ 1344', '§ 1344', '§ 1344', '§ 1344']

Before MARY M. SCHROEDER, HARRY PREGERSON, and JACQUELINE H. NGUYEN, Circuit Judges. Sean Kennedy, Federal Public Defender, Koren L. Bell (argued), Deputy Federal Public Defender, Los Angeles, CA, for Defendant–Appellant. André Birotte, Jr., United States Attorney, Robert E. Dugdale, Assistant United States Attorney, Tracy L. Wilkison (argued), Assistant United States Attorney, Los Angeles, CA, for Plaintiff–Appellee.
Congress enacted the Bank Fraud Act in 1984, and ever since, the federal courts have grappled with whether its provisions require proof of an intent to cause harm to the bank itself. The Act contains two clauses: the first criminalizes schemes “to defraud a financial institution,” and the second schemes to obtain bank assets or property under its control “by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1344. Last year, the Supreme Court held that the second clause does not require proof that the defendant intended to defraud the bank. Loughrin v. United States, 134 S.Ct. 2384, 2387 (2014). In this case, we deal with the first clause, which by its terms does require such proof. The question here is whether that means the government must prove the defendant intended the bank to be the principal financial victim of the fraud.
Whoever knowingly executes, or attempts to execute a scheme or artifice—
In Loughrin v. United States, the Supreme Court construed the second clause, and held that it does not require the government to prove that the defendant intended to defraud the bank. 134 S.Ct. 2384, 2387 (2014). Section 1344(2) targets schemes to obtain property held by the bank via misrepresentation to a third party, while § 1344(1) penalizes schemes to defraud the bank itself. See id. at 2389–92. The Supreme Court effectively required courts to treat the two clauses separately, holding that while they overlap substantially, the clauses are disjunctive and establish distinct offenses. Id. at 2390, 2390 n. 4.
Shaw thus seeks to characterize the difference between the two clauses as involving the intended financial victim of the fraud, i.e ., the intended bearer of the loss. The language of neither clause of the statute, however, refers to monetary loss or to the risk of such loss. The statutory language focuses on the intended victim of the deception, not the intended bearer of the loss. Section 1344(1) requires the intent to deceive the bank. Section 1344(2) requires false or fraudulent representations or pretenses to third parties. The Supreme Court made this point in Loughrin when it noted that the second clause was intended to broaden the scope of bank fraud to include schemes that did not involve deception of the bank directly, such as schemes to use stolen credit cards. See 134 S.Ct. at 2391–92. Section 1344(1) thus covers schemes to deceive the bank directly. Neither clause requires the government to establish the defendant intended the bank to suffer a financial loss.
In affirming Wolfswinkel's conviction, we recognized a circuit split as to whether § 1344(1) requires proof of risk of loss to the bank to establish the defendant's intent to defraud. Id. at 786. We held, however, that even assuming there were such a requirement, Wolfswinkel's scheme satisfied it. See id. Although he had provided security for potential losses, Wolfswinkel exposed the bank to a risk of loss in the form of administrative costs and the threat of competing creditor claims if it were forced to liquidate the collateral. Id. The defendant need not have intended the bank to bear the risk of losing the amount involved in the financial scheme itself.
We recognize that some circuits have held that risk of financial loss to the bank is an element that must be proven under § 1344(1). See, e.g., United States v. Staples, 435 F.3d 860, 866–67 (8th Cir.2006) (discussing difference of opinion among circuits on whether intent to harm or cause the bank a risk of loss is required). The reason given is that the purpose of the statute is protection of the federal fisc, and that purpose is not served if the bank faces no financial risk. See, e.g., Thomas, 315 F.3d at 201. Circuits adopting the requirement cite to the legislative history of the bank fraud statute, which shows that Congress enacted it because of the “strong federal interest in protecting the financial integrity of [federally insured financial] institutions.” See, e .g., id. (quoting S.Rep. No. 98–225, at 377 (1984), reprinted in 1984 U.S.C.C.A.N. 3182, 3517.); United States v. Nkansah, 699 F.3d 743, 759 (2d Cir.2012) (same). But requiring proof of intent that a bank bear a risk of loss does not serve this end. The entity that bears the risk of loss does not necessarily depend upon the entity (i.e., the federally insured financial institution) that the defendant intends to harm. It depends on the operation of banking laws that, as this case demonstrates, may result in having the instruments of the fraud, like the bank's customers or entities like PayPal, ultimately bear the loss. A scheme that is intended to harm third parties may, in fact, end up hurting the bank, and vice versa. Few criminals have any knowledge of the rules of law that govern which entity bears the risk of loss. Requiring intent to harm the bank only makes it more difficult to prosecute bank fraud. Nkansah, 699 F.3d at 759 (Lynch, J., concurring); see also Loughrin, 134 S.Ct. at 2395 n. 9 (citing Nkansah concurrence with approval).
The Court in Loughrin held that § 1344(2) does not require intent to defraud a bank because the plain language of that section includes no such requirement. 134 S.Ct. at 2389–2390. We similarly decline to read an additional element into § 1344(1) that Congress did not include; that does not serve the Congressional purpose; and that could needlessly entangle judges and juries in the intricacies of banking law. The district court correctly refused instructions that included such a requirement.