Opinion ID: 806318
Heading Depth: 3
Heading Rank: 1

Heading: Double-Pledging

Text: The Government contends that Steffen’s sale of the collateral while it was pledged to the Bank amounts to double-pledging, an act we have recognized to be a violation of section 1344. See Sheahan, 31 F.3d at 601 (“[E]vidence of double pledging, itself, is enough to establish a section 1344 violation”). The Government argues that Steffen’s actions are sufficiently similar to the criminal conduct in Sheahan and United States v. Matousek, 894 F.2d 1012 (8th Cir. 1990), to support an indictment for a scheme to defraud under a double-pledging theory. In Sheahan, the defendant pledged collateral as security for a loan that had already been pledged for a previous loan at a different bank. Sheahan, 31 F.3d at 601. In Matousek, the defendant pledged duplicate titles for vehicles that had already been sold as collateral for a loan. Matousek, 894 F.2d at 1012-13. These actions inherently required misrepresentations to the banks involved because when the defendants pledged their collateral as security, they falsely represented that they held unencumbered title to the collateral. Indeed, in Matousek, we recognized that the defendant “misrepresented the status of his inventory and the Bank surrendered good titles in exchange for worthless titles.” Id. at 1014. In contrast, Steffen never misrepresented the status of his collateral when he pledged it to the Bank; the tax credits had not already been sold or pledged to another lender at the time he entered -15- into the security agreement with the Bank. And after he sold the collateral to a third party, he was silent as to its status. This was undoubtedly a breach of contract,6 but it does not fit the framework of Sheahan or Matousek. Accordingly, we find that the facts set forth in the indictment failed to allege the offense of double-pledging.