Opinion ID: 747642
Heading Depth: 2
Heading Rank: 1

Heading: Sufficiency of the Indictment and of the Evidence

Text: 15 Yoon's arguments on appeal as to the sufficiency of the indictment and the sufficiency of the evidence blend together, centering on two main contentions. First, she contends that the government never alleged or proved beyond a reasonable doubt that she acted with the requisite intent, knowledge of, and involvement in this check-kiting scheme. Second, she contends that the government never alleged or proved beyond a reasonable doubt that, for purposes of 18 U.S.C. § 1344(1), a scheme to defraud a financial institution existed or that the banks were actually defrauded. Her arguments overlap, so we address them together. 16 Before trial, Mrs. Yoon moved to dismiss the indictment. 2 She argued that it failed to allege that she defrauded the financial institutions. The district court denied the motion, finding that the indictment sufficiently alleged that both Yoons committed bank fraud by means of a check-kiting scheme, in violation of 18 U.S.C. § 1344(1). United States v. Yoon, No. 95 CR 400-2 (N.D.Ill. Jan. 24, 1996). In support, the district court cited United States v. LeDonne, 21 F.3d 1418, 1425-28 (7th Cir.), cert. denied, 513 U.S. 1020, 115 S.Ct. 584, 130 L.Ed.2d 498 (1994). Mrs. Yoon now argues on appeal that the third superseding indictment was insufficient as a matter of law and that the district court should have dismissed it. She believes that the indictment fails to allege specific acts that she committed which constituted knowing participation in the scheme to defraud, and it fails to allege an illegal purpose of the scheme as required by § 1344(1). 17 We review a challenge to the sufficiency of an indictment de novo. Frank v. United States, 914 F.2d 828, 830 (7th Cir.1990). An indictment will be deemed sufficient if it (1) states the elements of the offense charged, (2) fairly informs the defendant of the nature of the charge so that she may prepare a defense, and (3) enables her to plead an acquittal or conviction as a bar against future prosecutions for the same offense. Hamling v. United States, 418 U.S. 87, 117, 94 S.Ct. 2887, 2907, 41 L.Ed.2d 590 (1974); United States v. Allender, 62 F.3d 909, 914 (7th Cir.1995), cert. denied, 516 U.S. 1076, 116 S.Ct. 781, 133 L.Ed.2d 732 (1996). In reviewing the sufficiency of an indictment, a court should consider the challenged count as a whole and should refrain from reading it in a hypertechnical manner. United States v. McNeese, 901 F.2d 585, 602 (7th Cir.1990) (citations omitted). It is generally sufficient that an indictment set forth the offense in the words of the statute itself if the statutory language unambiguously sets out all the elements necessary to constitute the offense. United States v. Hinkle, 637 F.2d 1154, 1157 (7th Cir.1981) (citing Hamling, 418 U.S. at 117, 94 S.Ct. at 2907). 18 The bank fraud statute, 18 U.S.C. § 1344 provides: 19 Whoever knowingly executes, or attempts to execute, a scheme or artifice-- 20 (1) to defraud a financial institution; or 21 (2) 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; 22 shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. 23 18 U.S.C. § 1344. In this case, the Yoons were indicted under § 1344(1). Section 1344(1) prohibits any recognizable scheme formed with the intent to defraud. LeDonne, 21 F.3d at 1425. Although bare check-kiting is not an offense under § 1344(2), see Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982), we have clearly held that a bare check-kiting scheme is an offense under § 1344(1). United States v. Doherty, 969 F.2d 425, 428 (7th Cir.), cert. denied, 506 U.S. 1002, 113 S.Ct. 607, 121 L.Ed.2d 542 (1992) (Check kiting, at root, is a plan designed to separate the bank from its money by tricking it into inflating bank balances and honoring checks drawn against accounts with insufficient funds.). In essence, a check kite allows the schemers to trick the banks into giving them interest-free loans. See Williams, 458 U.S. at 281 n. 1, 102 S.Ct. at 3089 (describing check-kiting schemes); LeDonne, 21 F.3d at 1425 n. 2 (same). 24 To sustain a conviction for bank fraud under § 1344(1) based on a check kite, the government must prove beyond a reasonable doubt that the defendant knowingly executed a scheme to defraud a financial institution. United States v. Norton, 108 F.3d 133, 135 (7th Cir.1997); LeDonne, 21 F.3d at 1427-28. That is, the indictment here must allege (1) that Mrs. Yoon (2) knowingly (3) engaged in a scheme to defraud the banks. We are certain that the detailed, seventeen-page indictment here properly alleges all three of these elements. 25 First, the scheme to defraud. We have broadly interpreted the range of schemes covered by the statute as being limited only by a criminal's creativity. Norton, 108 F.3d at 135. For purposes of § 1344(1), scheme[s] to defraud ... [are] broadly conceived to include conduct designed to deceive in order to obtain something of value, which ... may or may not include conduct involving false statements or misrepresentations of fact. LeDonne, 21 F.3d at 1426 (citations and emphasis omitted). The indictment here clearly alleges that, from January 2, 1990 to October 17, 1990, David and Susanne Yoon knowingly executed and attempted to execute a scheme to defraud Foster Bank, Itasca Bank, and Affiliated Bank (the banks), which scheme and artifice to defraud is commonly known as a 'check kite,' by creating fictitious balances in their checking accounts.... The indictment goes on to thoroughly describe how the Yoons wrote 697 checks on the five accounts involved, and arranged for the checks to be deposited 26 in such a manner and at such times so as to artificially and fraudulently inflate the numerical balances in their checking accounts.... This was done by the defendants to manipulate the numerical balance in the checking accounts and thereby create the false and fraudulent appearance that defendants' [sic] had sufficient legitimate available funds in various checking accounts, and to trick the banks into honoring checks drawn against accounts with insufficient funds. 27 The indictment continues for thirteen more pages describing the scheme to defraud in detail. For example, it describes how, in early 1990, the Yoons had a positive balance in all five checking accounts totaling approximately $8,305. During the ten-month period charged in the indictment, the indictment alleges that the Yoons deposited or caused to be deposited approximately $24,418,019 into the five accounts, of which $20,162,062 came from 697 nonsufficient fund, kited checks. The indictment also gives a detailed example of a five-step process by which, on August 2 and 3, 1990, the Yoons cross-deposited five interrelated checks totaling $158,000 in order to fraudulently inflate the balances of two of their accounts. This is, contrary to Mrs. Yoon's argument, an allegation of a scheme to defraud for purposes of § 1344(1), not § 1344(2). The indictment continues, but we need not. It more than sufficiently alleges a scheme to defraud the banks. 28 Next, we are sure that the indictment sufficiently alleges Mrs. Yoon's knowledge of and involvement in the scheme. It alleges that she maintained all five accounts jointly with her husband; that she personally signed 389 of the 697 kited checks, for a total of $10,785,518; that she was the office manager of the two Yoon businesses; that both she and her husband had employees contact the banks to obtain account balances; that she conferred with her husband after receiving the balances; that both of them would give written and oral instructions to their employees as to the shifting of funds among the accounts; that both of them would give written and oral instructions to their employees to prepare the kited checks; and that she personally typed out and prepared a number of the 697 kited checks. In sum, there are more than sufficient allegations in the indictment that Mrs. Yoon knowingly and intentionally participated to a substantial degree in this check-kiting scheme to defraud. 29 We find it difficult to distinguish between Mrs. Yoon's arguments as to the sufficiency of the indictment and the sufficiency of the evidence. The government is correct that the indictment is not the vehicle by which it was required to prove Mrs. Yoon's state of mind beyond a reasonable doubt. The indictment only must sufficiently allege the elements of the § 1344(1) offense, one of which is that Mrs. Yoon acted with knowledge of the scheme to defraud. Having concluded that the indictment does indeed sufficiently allege all the elements of the offense, we move on to the sufficiency of the evidence argument. In addition to the indictment sufficiently alleging all three of the required elements under § 1344(1), we are convinced that the evidence adduced at trial was more than sufficient to prove all three of these elements beyond any reasonable doubt. 30 We review the evidence and draw all reasonable inferences that can be drawn from it in the light most favorable to the government. We will affirm if any rational trier of fact could have found the elements of the crime beyond a reasonable doubt. United States v. Katalinich, 113 F.3d 1475, 1480 (7th Cir.1997). As we indicated above in discussing the sufficiency of the indictment, to sustain a conviction for bank fraud under § 1344(1) based on a check kite, the government must prove beyond a reasonable doubt that the defendant knowingly executed a scheme to defraud a financial institution. Norton, 108 F.3d at 135; LeDonne, 21 F.3d at 1427-28. 3 31 Mrs. Yoon's first argument, which we referred to above, is that the evidence did not show that she had the requisite intent to defraud. This is tied to the second argument--that there was not really a scheme to defraud, but, merely, overactive checking accounts and a lot of cross-depositing, which is not necessarily an illegal check-kiting scheme. Both of these arguments, however, fly in the face of the overwhelming evidence against Mrs. Yoon. As we said in LeDonne, [b]ecause direct evidence of a defendant's fraudulent intent is typically not available, specific intent to defraud may be established by circumstantial evidence and by inferences drawn from examining the scheme itself which demonstrate that the scheme was reasonably calculated to deceive persons of ordinary prudence and comprehension. 21 F.3d at 1426. As such, LeDonne indicated that the execution of the scheme, in itself, may be relevant to establishing the defendant's specific intent to defraud. Id. 32 This is such a case. This was, as the district court said, a very large project in deception. While it is true that there is no evidence that Mrs. Yoon said, I intend to defraud these banks, the sheer numbers of checks and amounts of money involved in this scheme during the ten-month period provide a surrogate for Mrs. Yoon's knowledge. As the district court stated, there was a virtual tornado of checks circulating between the five bank [accounts]. However, we hardly have to rely just on the existence of the scheme to defraud--there was more than sufficient testimonial evidence linking Mrs. Yoon to the scheme and providing evidence of her knowing participation in it. The evidence established that in 1989, the Yoons' businesses were operating at a loss of $600,000, and that the Yoons took a salary decrease of approximately $425,000. The accountant, John Zalud, testified that he had a discussion with Mrs. Yoon and her husband about their decline in salary, as well as about the business finances and his concern over the number and amount of cross-deposited checks. He also testified that he went over the books and records quarterly, and consulted Mrs. Yoon in relation to his reviews. 33 The testimony of Maureen Rasho and Susan Heller also provided compelling evidence of Mrs. Yoon's knowledge of and involvement in the scheme. Rasho and Heller both testified that they would call the banks to get the account balances. David, and sometimes Mrs. Yoon, would then instruct them as to how to move the money between the accounts. Heller testified that, many times, Mrs. Yoon and her husband would confer about the balances before instructing Rasho and Heller as to what transfers to make. Moreover, testimony of Zalud and Heller together established that, after Zalud stopped doing the bank reconciliations in 1990, Mrs. Yoon did them herself. Both Rasho and Heller testified that Mrs. Yoon was in charge of accounting and kept track of all the bank statements, books, and records for the businesses. In addition, the government introduced an August 3, 1990 note that illustrated a series of five cross-deposits designed to float the kite. The note was written by David Yoon to Maureen Rasho, but Mrs. Yoon's handwriting appeared on it; she wrote the check numbers of the deposit items making up the transactions. This is substantial testimonial evidence implicating Mrs. Yoon's knowledge of the businesses' financial situation. 34 As the government points out, because Mrs. Yoon had detailed knowledge of the financial situation of the business, she also knew the following: that business was in decline; that the business was operating on a deficit (deposits to all five accounts from outside sources was $4 million while the total number of checks written was $4.6 million); and that during the ten-month period, $24,771,077 was deposited to all five accounts, of which $20,385,713.45 came from cross-deposited checks. Mrs. Yoon herself signed over $10 million dollars worth of kited checks. As the government points out, [t]here is no conceivable legitimate business purpose for writing 697 cross-deposited checks totaling over $20 million when the business took in only $4 million in revenue from outside sources. Rather, it was done because expenses exceeded revenue by $600,000, and defendant and her husband were attempting to conceal the shortfall and remain in operation by running a check kite. From this evidence, the district court could reasonably infer that Mrs. Yoon had intricate knowledge of the scheme during the ten-month period. 35 Finally, Mrs. Yoon points out that after the fraud was discovered, she and her husband made full restitution to two of the banks and signed a note and pledged collateral to secure their debt to the third bank. She argues, citing United States v. Sirang, 70 F.3d 588 (11th Cir.1995), that this proves her good faith and negates any inference of her intent to defraud. Sirang is inapposite because it involved a defendant whose defense was that he wrote checks in good faith, not that he returned the money in good faith. Mrs. Yoon's conduct after the fraud was completed is irrelevant to the issue of whether the evidence was sufficient to show that she knowingly participated in the fraud during its existence, and we do not consider it for such a purpose. 36 Mrs. Yoon's second major contention about the sufficiency of the evidence is that there was not, in actuality, a scheme to defraud. She focuses on the fact that, because the banks' officers testified that they knew the Yoons were bouncing checks, the banks were alerted to this conduct and were not actually defrauded. First of all, we have already put to rest the idea that someone need actually be deceived for the § 1344(1) offense to be complete. LeDonne, 21 F.3d at 1426 (it matters not ... whether the fraud succeeded and the victim [was] deceived). That is of no matter, though, because it is clear that the evidence was sufficient to establish that there was a scheme to defraud the banks for purposes of § 1344(1). As the district court described when it announced judgment, this scheme worked because of the existence of the five different accounts and four banks. The banks could not see what was going on with each of the other four accounts--that was how the kite was able to fly. Thus, the argument that each individual bank knew that nonsufficient fund checks were being written is irrelevant because the banks had no idea what was going on with the other accounts. As the district court stated, [t]he fact that there [were] 38 overdrafts, or whatever the final number was, out of 697 kited checks I think shows a remarkable attention to detail by both David Yoon and the defendant that there were only 38 slips between the cup and the lip where they had to come in and make 'good.' And I use that in quotes because they made good with kited checks in most, if not all, of the instances. We agree. 37 In conclusion, we concur with the district court's assessment of the evidence in this case. It stated: This may well be a case where the evidence is so overwhelming that it is almost difficult to address the elements, but I think we have evidence-we have addressed those elements, particularly of her knowledge of the artifice and scheme to defraud deceiving the banks thus subjecting them to risk. The government proved beyond a reasonable doubt that the kite got off the ground with help from Mrs. Yoon. Mrs. Yoon's arguments, unfortunately, do not fare so well. We are certain that the district court was correct in finding Mrs. Yoon guilty based on the evidence presented.