Opinion ID: 1248604
Heading Depth: 3
Heading Rank: 2

Heading: Failure to Repay the Fraudulently Obtained Bank Loan

Text: The district court's finding that Kilkenny failed to repay the bank loan in 2002 does not change this result. Failure to repay a fraudulently obtained bank loan does not constitute conduct for the offense of bank fraud. Under the federal bank fraud statute, it is a crime to knowingly execute[ ], or attempt[] to execute, a scheme or artifice . . . 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. 18 U.S.C. § 1344. The language of § 1344 punishes each execution of a fraudulent scheme, not each act in furtherance of such a plan. United States v. Harris, 79 F.3d 223, 232 (2d Cir.1996). Although the statutory text does not define execution, there is helpful case law interpreting that term. In analyzing when a fraudulent scheme was executed, courts look to a number of factors, including the overall contours of the fraudulent scheme and  perhaps most importantly  the point at which the financial institution was put at risk of financial loss. See United States v. De La Mata, 266 F.3d 1275, 1287-88 (11th Cir.2001) ([A] bank fraud offense is complete upon the `execution,' or attempted execution of the scheme. . . . [E]ach part of the scheme that creates a separate financial risk for the financial institution constitutes a separate execution.); United States v. Anderson, 188 F.3d 886, 888 (7th Cir.1999) ([T]he crime of bank fraud is complete when the defendant places the bank at a risk of financial loss, and not necessarily when the loss itself occurs.); United States v. Rimell, 21 F.3d 281, 287 (8th Cir.1994) (stating that to determine what constitutes an execution of a bank fraud scheme one must first ascertain the contours of the scheme); United States v. Hord, 6 F.3d 276, 282 (5th Cir.1993) (finding that bank fraud plan was executed with each deposit of a bogus check in part because it was the deposits that put the bank at risk); see also United States v. Reitmeyer, 356 F.3d 1313, 1318 (10th Cir. 2004) (holding, in the context of the Major Fraud Act, that determining when a scheme is executed will depend on factors including the goal of the plan, its nature, the benefits intended, and whether the conduct created a new and independent financial risk.). There are of course situations where conduct for the offense of bank fraud occurs after the point at which the bank is first put at risk of financial loss. Our decision in United States v. Duncan, 42 F.3d 97 (2d Cir.1994), provides a useful illustration of such a situation. In Duncan, several directors of a savings and loan association conspired to purchase two parcels of real estate in order to lease or sell the property back to the bank at a profit. Id. at 99-100. The transactions were orchestrated so as to hide the conspirators' interest in the real estate from the other bank directors. Id. After his conviction for bank fraud, Duncan raised an ex post facto challenge on appeal. He contended the bank fraud was complete once the conspirators agreed to secretly purchase the property. Id. at 103-04. We rejected that characterization, holding instead that the offensive conduct was not complete until the real estate was sold back to the bank. Id. at 104. Key to the result in Duncan was the fact that the sale of these properties to the bank was the  central object of the charged criminal conduct. Id. (emphasis added). Notably, the resale of the properties to the bank in Duncan posed a risk of financial loss that was separate and independent from the defendant's initial usurpation of the corporate opportunity. See id. (stating that conspirators intended to both seize for themselves two pieces of property at a bargain and sell the properties to the bank at a premium). There are no facts in the case presently before us analogous to those at issue in Duncan. It is clear that the main purpose of Kilkenny's bank fraud scheme was to obtain the M & T bank loan on false pretenses. The bank was put at risk of financial loss as soon as Kilkenny had submitted the fraudulent loan application and obtained the funds. The information alleges no further conduct on Kilkenny's part that created a new or additional risk of loss. The government insists that, by failing to make payments on the fraudulently obtained loan, appellant extended the life of the illegal plan through his enjoyment of the proceeds. Adopting this approach would go too far, potentially extending the offense of bank fraud indefinitely. No doubt, the vast majority of bank fraud schemes entail not only obtaining but also retaining the ill-gotten gains. But when the proceeds of a criminal venture are spent may not be viewed as part of a plan to defraud. See Anderson, 188 F.3d at 891. To rule otherwise and hold that failure to repay a fraudulently obtained bank loan constitutes conduct for the offense of bank fraud would extend the life of the offense so indefinitely as to render the ex post facto prohibition ineffective. The Supreme Court has cautioned against such a result in other contexts. See Grunewald v. United States, 353 U.S. 391, 402, 77 S.Ct. 963, 1 L.Ed.2d 931 (1957) (holding a conspiracy to conceal should not be inferred from acts of concealment because every conspiracy will inevitably be followed by actions taken to cover the conspirators' traces and the opposite result would extend the life of a conspiracy indefinitely). Kilkenny's M & T bank fraud scheme was executed no later than when he received the funds from his fraudulent loan application. Consequently, it was error for the district court to treat defendant's subsequent failure to repay the fraudulently obtained bank loan as conduct that was part of the offense of bank fraud.