Opinion ID: 784563
Heading Depth: 3
Heading Rank: 2

Heading: Sight Drafts

Text: 18 The convictions for violation of 18 U.S.C. § 514(a)(2), as well as the portion of the conspiracy charge relating to those offenses, are challenged on appeal by Modderman (counts 1, 15-17), Yates (counts 1 and 24), Sagorski (counts 1, 18-22), and Goodwin (count 1). 6 Defendants make three main claims: that the sight drafts are not fictitious obligations; that they do not appear to be actual financial instruments; and that there was no evidence of an intent to defraud because they did not attempt to get a refund from the IRS. None of these claims have merit. 19 Added in 1996, § 514(a)(2) makes it a felony to pass, present, offer, issue, attempt or cause the same, or possess, with intent to defraud, 20 any false or fictitious instrument, document, or other item appearing, representing, purporting, or contriving through scheme or artifice, to be an actual security or other financial instrument issued under the authority of the United States, a foreign government, a State or other political subdivision of the United States, or an organization[.] 21 The legislative history of this provision indicates that it was intended to cover fictitious instruments, as opposed to counterfeit instruments, in order to close a loophole in the criminal statutes. United States v. Howick, 263 F.3d 1056, 1066-67 (9th Cir.2001), cert. denied, 535 U.S. 946, 122 S.Ct. 1339, 152 L.Ed.2d 243 (2002). The court in Howick articulated the distinction between counterfeit and fictitious documents as follows, id. at 1067: 22 A counterfeit obligation is a bogus document contrived to appear similar to an existing financial instrument; a fictitious obligation is a bogus document contrived to appear to be a financial instrument, where there is in fact no such genuine instrument, and where the fact of the genuine instrument's nonexistence is presumably unknown by, and not revealed to, the intended recipient of the document. 23 In this case, there was testimony that although there is a legitimate financial instrument known as a sight draft, the United States Treasury has not used sight drafts in modern history. Moreover, the United States Treasury maintains no depository accounts against which an individual could draw a check, draft, or any other financial instrument. The sight drafts at issue here were properly charged as fictitious instruments under § 514(a)(2). 24 Yates asserts, without elaboration or citation to authority, that it was obvious from the face of the sight draft that it was not an actual financial instrument within the meaning of § 514(a)(2). While the sight drafts were not in fact accepted by any of the recipients, we agree with the court in Howick that because the very purpose of the statute is to supplement the preexisting counterfeit laws by criminalizing bogus obligations that are not copies of any actual obligation the term actual in § 514(a)(2) cannot be given its most natural meaning. 263 F.3d at 1067 (emphasis in original). Instead, it should be interpreted to encompass the idea of verisimilitude — the quality of appearing to be true or real. Id. 7 25 Recognizing the infinite range of financial instruments, both genuine and fictitious, the court in Howick interpreted the phrase `actual security or other financial instrument' to mean one that appears to be `actual' in the sense that it bears a family resemblance to genuine financial instruments or, in other words, include[s] enough of the various hallmarks and indicia of financial obligations so as to appear to be within that class. 263 F.3d at 1068. In this case, the government presented testimony from William Kerr of the Office of the Comptroller describing the sight drafts as having good physical quality (including microencoding, microprinting, a colored background, and an artificial watermark), and noting that their invalidity would not necessarily be apparent just from looking at them. 26 Finally, defendants assert that there was insufficient evidence of an intent to defraud because they made no attempt to obtain a refund from the IRS. As the government points out, however, it was not necessary to prove defendants requested a refund in order to establish that the sight drafts were presented with intent to defraud. Intent may be proven through circumstantial evidence, and there was evidence from which the jury could infer that defendants knowingly sent worthless sight drafts drawn on the United States Treasury with the intention that they be accepted for value.