Opinion ID: 552369
Heading Depth: 2
Heading Rank: 1

Heading: Bank Fraud Statute

Text: 10 As enacted in 1984, and as applicable to this case, the bank fraud statute provided in relevant part as follows: 11 (a) Whoever knowingly executes, or attempts to execute, a scheme or artifice-- 12 (1) to defraud a federally chartered or insured financial institution; or 13 (2) to obtain any of the moneys, funds, credits, assets, securities or other property owned by or under the custody or control of a federally chartered or insured financial institution by means of false or fraudulent pretenses, representations, or promises, shall be [fined or imprisoned]. See former 18 U.S.C. Sec. 1344(a). 4 14 Briggs was charged under an indictment and an information whose language comprehends both provisions of Sec. 1344(a), so her conviction will stand if it can be sustained under either subsection. Cf. United States v. Medeles, 916 F.2d 195, 197-98 (5th Cir.1990) (where indictment and jury charge do not allege elements of a subsection of statute, conviction cannot be sustained under that subsection). We consider each provision in turn.
15 Former subsection (a)(1) prohibits a scheme or artifice ... to defraud a financial institution. Briggs contends that this section is inapplicable to her conduct, as her employers suffered the losses, not the banks. The banks were not even exposed to liability, so far as the record indicates. Accordingly, Briggs argues, she may have defrauded her employers, but not the banks. 16 Now, in light of the fact that the mail and wire fraud statutes have been used to prosecute frauds against intangible property rights, one might construct a response to Briggs' suggestion. Conceivably, the banks, though they are not Briggs' employers, have a right to expect honesty in the performance of her duties related to wire transfers. Maybe this right is an intangible property right. Perhaps Briggs defrauded the banks of this property. In a strictly grammatical sense, the charges to which Briggs pled guilty might seem open to such an interpretation, because the verb to defraud appears in both without an indirect object specifying what she stole. 5 17 However, the government does not make this argument (or any argument with respect to subsection (a)(1)). It is not hard to understand why. Even if grammatically plausible, an intangible property rights interpretation of these charges would be strained at best. Neither the indictment nor the information to which Briggs pled guilty mention intangible property or the right to honest services. As overt acts supporting the charges, both cite only the theft of funds. Accordingly, we think the fair reading of the indictment and information is that Briggs was charged with defrauding the financial institutions of money and funds. 6 18 Under this reading, Briggs' bank fraud conviction cannot be sustained under Sec. 1344(a)(1). She simply did not defraud the banks out of anything belonging to them. 19
20 The second provision of former section 1344, subsection (a)(2), comes closer to Briggs' conduct. This subsection punishes anyone who 21 knowingly executes, or attempts 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 federally chartered or insured financial institution by means of false or fraudulent pretenses, representations, or promises 22 See former 18 U.S.C. Sec. 1344 & 1344(a)(2). 23 As the funds in this case were not owned by the banks, the parties focused their discussion on the custody or control language. It is unclear how to square this phrase with the legislative history, which emphasizes that the purpose of the statute is the protection of financial institutions themselves. 7 Is the financial institution the victim in a scheme whose execution causes it no loss? 8 Briggs says no. Noting the dangers that inhere in over-federalizing garden variety fraud, she suggests that the custody or control language only applies where the defendant is an employee of the bank from which she obtains the funds. This interpretation, although imaginative, finds no support in the statutory text or legislative history, other than the need to reconcile or ignore the apparent textual inconsistency. 24 We turn instead to another clause of subsection (a)(2), the requirement that the scheme be by means of false or fraudulent pretenses, representations, or promises. So far as the sparse record discloses, Briggs made no explicit false representations, statements, or promises in carrying out her scheme. 9 Not surprisingly, the government contends that her wire transfer instructions to the bank contain implicit false representations or pretenses, to the effect that the transfers were within the scope of her authority. 25 Logical as this contention might be, it is foreclosed by our precedent. In United States v. Medeles, 916 F.2d 195 (5th Cir.1990) we disapproved a similar implicit representation theory in the context of a check-kiting scheme. Medeles maintained checking accounts at three federally insured banks. He kited checks between these accounts, knowing the checks to be drawn on insufficient funds. In the course of this scheme, Medeles made no explicit false representations. Ultimately, he withdrew $3700 and flew to Las Vegas for a gambling spree. 26 Medeles was indicted and convicted under former 18 U.S.C. Sec. 1344(a)(2). 10 The conviction was premised on the notion that by depositing the checks, Medeles implicitly represented that they were good. Since Medeles knew this to be false, the government characterized the act of depositing the checks as a (knowing) false representation. 27 We reversed, holding that the depositing of a series of known insufficient funds checks does not alone constitute 'false or fraudulent pretenses, [or] representations.'  See Medeles, 916 F.2d at 202 (brackets in original). 11 The Medeles court relied on Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982) (5-4 decision), in which the Supreme Court considered a check kiter's conviction under a statute prohibiting the making of certain false statement[s] for the purpose of influencing the actions of a federally-insured bank. See 18 U.S.C. Sec. 1014. In reversing the conviction, the Supreme Court reasoned: 28 [A] course of conduct [consisting of depositing several checks knowing them not to be supported by sufficient funds] [does] not involve the making of a false statement for a simple reason: technically speaking, a check is not a factual assertion at all, and therefore cannot be characterized as true or false. ... A check [does] not, in terms, make any representation as to the state of [one's] bank balance. 29 Williams, 458 U.S. at 284-85, 102 S.Ct. at 3091. Although this reasoning has been criticized as overly technical, see id. at 291-92, 102 S.Ct. at 3095 (dissenting opinion of White, J.), at 292, 295-98, 102 S.Ct. at 3095, 3097-99 (dissenting opinion of Marshall, J.); see also United States v. Kucik, 844 F.2d 493, 498 (7th Cir.1988) (discussing theft by false pretenses under bank robbery statute, 18 U.S.C. Sec. 2113), we are nonetheless bound by it. 30 Williams and Medeles compel us to conclude that a wire transfer order is not accompanied by an implicit representation or pretense of authority for the transfer. If the knowing presentation of an insufficient funds check is not accompanied by an implicit representation or pretense, there is no principled way to regard wire transfer orders in a different light, particularly on a record bare of any detail about the form and content of the orders. 31 Nor do we view Briggs' wire transfer orders as accompanied by a false or fraudulent ... promise[ ]. Whereas a check is a promise to pay the holder upon the dishonor of the check, see Medeles, 916 F.2d at 200 n. 8, we understand a wire transfer order to be simply an instruction to a bank, unaccompanied by a promise of any kind. See, e.g., Subpart B of Regulation J of the Federal Reserve System, 12 C.F.R. Sec. 210.25-.38 (1990) (defining and governing wire transfers); Walker v. Texas Commerce Bank, 635 F.Supp. 678, 680 (S.D.Tex.1986) (paragraph 12) (describing one bank's procedure for initiating oral wire transfers). Nothing in the record contradicts our general understanding. 32 Since Briggs cannot be considered to have made any representations, pretenses, or promises at all--false or otherwise--her bank fraud conviction cannot be sustained under subsection Sec. 1344(a)(2). Since we have also concluded that her conviction cannot be sustained under subsection (a)(1), we conclude that her conduct did not violate the bank fraud statute