Court Opinion

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Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

3-24-2006

USA v. Leahy
Precedential or Non-Precedential: Precedential

Docket No. 03-4490

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                                    PRECEDENTIAL

  UNITED STATES COURT OF APPEALS
       FOR THE THIRD CIRCUIT

           Nos. 03-4490/4542/4560

      UNITED STATES OF AMERICA

                      v.

              PAUL J. LEAHY

           Appellant in No. 03-4490

      UNITED STATES OF AMERICA

                      v.

             TIMOTHY SMITH

           Appellant in No. 03-4542

      UNITED STATES OF AMERICA

                      v.

              DANTONE, INC.

           Appellant in No. 03-4560

On Appeal from the United States District Court
   for the Eastern District of Pennsylvania
           (D.C. No. 01-cr-00260-2)
  District Judge: Honorable J. Curtis Joyner

             Argued June 8, 2005
   Before: FUENTES, VAN ANTWERPEN, and BECKER,
                     Circuit Judges.

                    (Filed: March 24, 2006)

Robert E. Welsh, Jr. (Argued)
Lisa A. Mathewson
Welsh & Recker, P.C.
2000 Market Street, Suite 2903
Philadelphia, PA 19103

ATTORNEYS FOR APPELLANT PAUL J. LEAHY

Jeffrey M. Miller (Argued)
Nasuti & Miller
Public Ledger Building, Suite 1064
150 South Independence Mall West
Philadelphia, PA 19106

ATTORNEY FOR APPELLANT TIMOTHY SMITH

Ian M. Comisky (Argued)
Matthew D. Lee
Blank Rome LLP
One Logan Square
Philadelphia, PA 19103

ATTORNEYS FOR APPELLANT DANTONE, INC.

Patrick L. Meehan
United States Attorney
Laurie Magid
Deputy United States Attorney for Policy and Appeals
Robert A. Zauzmer (Argued)
Assistant United States Attorney, Senior Appellate Counsel
Mary E. Crawley (Argued)
Assistant United States Attorney
Office of the United States Attorney
615 Chestnut Street
Philadelphia, PA 19106

                                 2
ATTORNEYS FOR APPELLEE UNITED STATES OF
AMERICA

                     OPINION OF THE COURT

FUENTES, Circuit Judge.

                        I. Introduction

       For a period of almost three years, the Defendants,
Dantone, Inc., and its two senior managers Paul Leahy and
Timothy Smith, were retained by several banks to auction
repossessed automobiles at the highest price and reimburse the
proceeds, minus fees and expenses, to the banks. With respect to
at least 311 automobiles, however, the Defendants did not
auction the cars to the highest bidder and remit the proceeds to
the banks as promised. Rather, they kept those cars for their
own inventories, resold them at higher prices, falsely
misrepresented to the banks that they had been auctioned for
less, and pocketed the difference between the false and actual
prices. A jury found Smith, Leahy, and Dantone guilty of
engaging in, and aiding and abetting, bank fraud in violation of
18 U.S.C. § 1344 and 18 U.S.C. § 2.

       This matter presents several issues on appeal. First, we
address several contentions that the District Court erroneously
instructed the jury as to the Government’s burden under the bank
fraud statute. Second, we consider whether there was sufficient

                                3
evidence to sustain the Defendants’ convictions. Third and
finally, we address the scope of the federal bank fraud statute, 18
U.S.C. § 1344, and clarify the intent and loss elements required
to support a conviction under the statute.1

       Because we ultimately reject the Defendants’ arguments
with respect to the scope of the bank fraud statute, the District
Court’s jury instructions, and the sufficiency of the evidence, we
will affirm their judgments of conviction. We also decide that,
to the extent that the Defendants contend that the imposition of
their sentences pursuant to the U.S. Sentencing Guidelines (the
“Guidelines” or “U.S.S.G”) are in error after Booker, such issues
are best determined by the District Court in the first instance.
See United States v. Davis, 407 F.3d 162 (3d Cir. 2005).

       Accordingly, we will vacate the Defendants’ sentences
and remand for further proceedings consistent with this opinion.
Because the forfeiture and restitution orders are inextricably
intertwined with the District Court’s loss findings under the
Guidelines, we will vacate and remand those orders as well.

                         II. Background

       1
         The fourth issue in this case, the applicability of United
States v. Booker, 125 S.Ct. 738 (2005), to orders of forfeiture and
restitution is addressed in a separate opinion. See United States v.
Leahy, __ F.3d __, 2006 U.S. App. LEXIS 3576 (3d Cir. Feb. 15,
2006). We apply our holding in Leahy in Part V.

                                 4
       A. Facts

       On May 15, 2001, a federal grand jury sitting in the
Eastern District of Pennsylvania returned a ten count indictment
charging Defendants Smith, Leahy, and Dantone with bank
fraud, in violation of 18 U.S.C. § 1344, and aiding and abetting,
in violation of 18 U.S.C. § 2 (the “Indictment”). Dantone is a
privately held corporation which owns and operates a public
automobile auction in Conshohocken, Pennsylvania, known as
Carriage Trade Auto Auction (“Carriage Trade”). Dantone’s
sole shareholder and president was Dominic Conicelli, Sr.
During all times relevant to the Indictment, Smith was the
general manager of Carriage Trade, while Leahy was the
assistant manager or operations manager.

       The Indictment alleged that between approximately 1993
and 1996, Dantone entered into agreements with ten financial
institutions (collectively, “the banks”) to auction automobiles
and remit the full proceeds of the actual sales, minus auction fees
and expenses.2 Of the ten banks at issue in this case, nine
consigned cars that had been repossessed following the owners’
default on a loan obligation, while the tenth, Continental Bank,

       2
        The ten banks at issue in this matter are: Meridian Bank,
Continental Bank, Trust Company of New Jersey, National Bank
of Boyertown, National Penn Bank, Midlantic National Bank, Bryn
Mawr Trust Company, the Police and Fire Credit Union, Mellon
Bank, and the DPL Federal Credit Union. The deposits of each of
these banks were insured either by the Federal Deposit Insurance
Corporation or the National Credit Union Administration.

                                5
consigned repossessed cars as well as cars that had been returned
at the expiration of lease agreements.

       Per their agreements, the banks consigned the
automobiles to Carriage Trade to be auctioned to the highest
bidder. Nine of the ten banks established a minimum or floor
price for each car; if the highest auction price fell below the
minimum, the car could not be sold without the bank’s consent.
The banks typically would set the minimum price based on the
condition of the car and in consultation with the auction’s
employees. The tenth bank, rather than setting minimum bids,
informed Carriage Trade personnel of the amounts owed by the
bank’s customers on the defaulted car loans. Evidence at trial
indicated that it was routine for the banks to face a deficiency
balance on the outstanding loan even after the car had been
auctioned, from which it could be inferred that the amount of the
minimum bid set by the banks was typically lower than the
outstanding loan obligation on the car. For the most part, the
cars were sold “as is.” When Carriage Trade sold automobiles at
auction on behalf of one of the banks, Carriage Trade would
send checks representing the proceeds of the sale, a bill of sale,
and documents showing the expenses incurred by the auction in
selling the automobiles. If the car was one which had been
repossessed by the bank, the money made from the sale of the
car at auction could then be put toward satisfying the outstanding
loan. The banks assumed or were told that the checks received
from the Carriage Trade auction represented the highest bid,

                                 6
minus fees and expenses.

       The Indictment alleges that Dantone, Smith and Leahy
defrauded the banks by not actually selling certain automobiles
at an auction to the highest bidder or at the prices the Defendants
represented to the banks. Instead, the Defendants diverted the
cars into Carriage Trade’s inventory, apparently repaired and/or
reconditioned them in limited instances, and then sold them
under the Carriage Trade name at a “second sale” at prices equal
to or higher than the minimum established by the banks. The
Defendants deceived the banks with respect to at least 311 cars,
pocketing the difference between the prices they falsely
represented to the banks and the real prices they obtained for the
cars at the second sale. Typically, the Defendants used two
methods to sell the cars for themselves. Most of the cars were
sold through the Carriage Trade auction to good faith purchasers
who did not know that the Defendants had misappropriated the
cars for their own inventories. The Defendants also sold a
smaller number of cars in a private auction to a select group of
car dealers, who were invited to bid on the cars. The scheme
began to unravel, however, when Edward Stigben, a co-schemer
with the Defendants, was approached by the FBI regarding an
on-going investigation of Carriage Trade; Stigben eventually
received immunity from the Government in exchange for his
testimony at trial regarding the fraudulent scheme.

       A 2 1/2 week jury trial began on December 2, 2002. The

                                 7
Government introduced the testimony of bank representatives as
well as employees of Carriage Trade. The Government also
introduced a ledger maintained by Leahy (the “Leahy ledger”)
which detailed the profits realized by Dantone as a result of the
Defendants’ deceptive conduct. In addition, the Government
introduced, for each of the 311 cars, the two sets of documents
that Carriage Trade prepared: the false bill of sale and
accompanying paperwork which the Defendants sent to the bank
along with a check, and the true bill of sale and accompanying
paperwork that was generated when the Defendants sold the cars
for their own benefit.

       On December 20, 2002, the jury returned a verdict of
guilty on all counts as to each Defendant.

       B. Sentencing

       Thereafter, the District Court initiated sentencing
proceedings against the Defendants. Because the Defendants’
conduct involved a fraudulent scheme in violation of 18 U.S.C.
§ 1344, they were sentenced under U.S.S.G. § 2F1.1, the
Guidelines provision applicable to crimes of fraud and deceit.
Section 2F1.1 provides for a base offense level of six with
enhancements to the offense level based on the amount of loss to
the victim attributable to the fraudulent conduct. At the
Defendants request, the District Court held a four hour
evidentiary hearing to determine the amount of loss to the victim

                                 8
banks for purposes of the Guidelines. The Defendants, relying
on United States v. Dickler, 64 F.3d 818 (3d Cir. 1995), argued
that the loss to the banks was zero, or in the alternative, far less
than the $418,657 amount relied on by the Government. In
particular, the Defendants contended that they had significantly
enhanced the values of the consigned automobiles by
refurbishing them and by extending certain guarantees and perks
such as credit terms to purchasers under the Carriage Trade
name. They argued that any such “improvements” in value to
the cars should not be credited as loss to the banks for purposes
of the Guidelines. At the end of the hearing, the District Court
essentially adopted the Government’s position, finding that the
loss to the banks was $408,970, which was calculated by
subtracting from the total gain to the Defendants – the $418,657
amount representing the difference between the false sales price
and the actual sales price for the 311 cars – the following: (1)
$5,000 for a reimbursement payment that Carriage Trade made
to one of the banks (Midlantic Bank) after the bank discovered a
fraudulent sale and complained to Conicelli; and (2) $4,687 in
repairs and enhancements which the District Court found the
Defendants made to some of the 311 cars. The loss finding of
$408,970 triggered a nine-level enhancement in the offense level
pursuant to U.S.S.G. § 2F1.1.

       In addition, the Indictment contained a notice of forfeiture
pursuant to 18 U.S.C. § 982(a)(2) in the amount of $418,657,
which was alleged to be the proceeds of the scheme, i.e., the

                                  9
difference between the false sales prices and the actual sales
prices. During trial, the parties agreed to remove the forfeiture
issue from the jury and have it decided by the District Court. On
February 19, 2003, the Government filed a motion seeking entry
of an order of forfeiture and money judgment. The Defendants
objected, contending that the gain from their fraud was less than
$418,657, based on their physical repairs to the cars as well as
the other sales guarantees that were extended under the Carriage
Trade name. The District Court eventually entered an order of
forfeiture and money judgement in the amount of $418,657,
concluding that the Government had established by a
preponderance of evidence that the sum constituted proceeds that
the Defendants had obtained directly or indirectly as a result of
the offenses for which they were convicted.

       In addition to the loss and forfeiture calculations, Smith
and Leahy objected to several sentencing enhancements for their
alleged role in the offense. The District Court, however, found
that Smith and Leahy participated in a fraud that was committed
by five or more participants, within the meaning of U.S.S.G.
§ 3B1.1(a); that Smith was a leader or organizer of the fraud;
and that Leahy was a manger or supervisor of the fraud.
Accordingly, the District Court applied a four-level enhancement
to Smith’s base offense level, and a three-level enhancement to
Leahy’s base offense level.

       Smith was sentenced to a prison term of 46 months; five

                                10
years of supervised release; a fine of $10,000; a special
assessment of $1,000; restitution, for which he bears joint and
several liability, in the amount of the victim banks’ loss, i.e.,
$408,970; and forfeiture, for which he is jointly and severally
liable, in the amount of the Defendants’ proceeds, i.e., $418,657.
Leahy was sentenced to a prison term of 37 months; five years of
supervised release; a fine of $5,000; and the same penalties as
Smith regarding special assessment, restitution, and forfeiture.
The corporate defendant Dantone received five years of
probation; a fine of $800,000; and the same penalties as Leahy
and Smith regarding restitution and forfeiture.3

                          *       *       *
       In their appeal from their judgments of conviction and
sentence, the Defendants raise several arguments. First, the
Defendants allege that the District Court’s jury instructions were
defective in several critical respects and failed properly to
instruct the jury as to the requisite elements to convict under
§ 1344. Second, they contend that there was insufficient

       3
        It appears that, due to a clerical error, the written judgment
for the corporate Defendant Dantone contained several penalties
that can only be levied against an individual. For instance, the
written judgment specified that Dantone could not leave the district
without permission of the probation officer, must support his or her
dependents, and refrain from using drugs or excessive alcohol. The
United States has indicated that it consents to the entry of an order
of this Court striking these provisions. See Gov. Br. at 10 n.1.
However, because we will vacate the sentences and remand for
resentencing, no such order will be necessary, and the District
Court may correct any such error on remand.

                                 11
evidence to sustain a conviction of bank fraud as the
Government failed to proffer any evidence that the banks
suffered any loss or that the Defendants acted with the requisite
intent to defraud the banks, as opposed to the banks’ customers,
the borrowers in whose name the cars were titled. With regard
to their sentences, the Defendants contend that the District Court
erred in calculating the amount of loss suffered by the banks,
which was relied upon by the District Court to calculate the
Defendants’ sentences, including their criminal fines, as well as
the amount of restitution and forfeiture. The Defendants also
contend that the District Court’s imposition of fines, restitution
and forfeiture for conduct arising out of the same underlying
facts violates the Eighth Amendment’s Excessive Fines Clause,
and that the District Court erred in imposing joint and several
liability on the three Defendants for the orders of restitution and
forfeiture. Finally, the Defendants, relying on the Supreme
Court’s decision in Booker, contend that the District Court’s
imposition of forfeiture and restitution violated the Sixth
Amendment.4

       We consider each argument in turn.

                 III. JURY INSTRUCTIONS

       The Defendants were convicted of violating the federal bank

       4
       This Court has jurisdiction over a judgment of conviction
and sentence in a criminal case pursuant to 28 U.S.C. § 1291.

                                12
fraud statute, 18 U.S.C. § 1344, which imposes criminal penalties
upon:
              Whoever knowingly executes, or attempts to
              execute, a scheme or artifice to

              (1)     defraud a financial institution; or

              (2)     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.

The Defendants argue that the District Court: (A) improperly
instructed the jury on the two prongs of the bank fraud statute;
(B) improperly defined a scheme or artifice to defraud; (C) failed
to give Defendants’ requested good faith instruction; (D)
improperly gave a willful blindness instruction; (E) improperly
gave an intangible rights instruction; and (F) improperly gave a co-
schemers’ liability instruction.

        We exercise plenary review in determining “whether the
jury instructions stated the proper legal standard.” United States v.
Coyle, 63 F.3d 1239, 1245 (3d Cir. 1995). We review the refusal
to give a particular instruction or the wording of instructions for
abuse of discretion.     Id.   Finally, “when we consider jury
instructions we consider the totality of the instructions and not a

                                   13
particular sentence or paragraph in isolation.” Id.

       A.      Bank fraud

       The District Court provided a lengthy instruction to the jury
regarding the elements of bank fraud. The Defendants contend that
the bank fraud instruction was in error in at least two material
respects under United States v. Thomas, 315 F.3d 190 (3d Cir.
2002), a case decided only days after the jury reached its verdict in
this matter.5 First, they contend that the instruction is premised
upon a disjunctive reading of § 1344 in violation of Thomas.
Second, the Defendants contend that the instruction with regard to
§ 1344’s intent requirement was in error. We find both arguments
to be without merit.

       In Thomas, we addressed whether the “intent to defraud the
bank” element of § 1344(1) was to be read as applying to § 1344(2)
as well, or whether the two prongs of the bank fraud statute should
be read independently of each other.          We concluded that a
“disjunctive reading of the two sections of § 1344 . . . gives the
statute a breadth of scope that extends well beyond what Congress
intended the statute to regulate.” 315 F.3d at 196. Relying on our

       5
         Although Thomas was decided after the jury reached its
verdict, it is well-established that we will apply the law of the
Court as it exists at the time of appeal. See Virgin Islands v. Civil,
591 F.2d 255, 258 (3d Cir. 1979) (“As a general principle, an
appellate court applies the law as it exists at the time of appeal even
if different than at the time of trial.”).

                                  14
prior decision in United States v. Monostra, 125 F.3d 183 (3d Cir.
1997) (suggesting, but not holding, that the two sections of § 1344
must be read conjunctively), as well as the legislative history of the
bank fraud statute, we concluded that the § 1344 must be read in
the conjunctive, that the intent to defraud the bank element of
§ 1344(1) must apply to § 1344(2) as well. Thomas, 315 F.3d at
196. Accordingly, “there can be no such thing as an independent
violation of subsection (2). To convict at all under the bank fraud
statute, there must be an intent to defraud the bank.” Id., 315 F.3d
at 197. “The sine qua non of a bank fraud violation, no matter
what subdivision of the statute it is pled under, is the intent to
defraud the bank.” Id.6

       After reviewing the District Court’s bank fraud instruction
in this matter, we find that the instructions did not rest on an

       6
        There is some disagreement among the circuits as to the
proper reading of § 1344. For instance, the Second Circuit
formally reads § 1344 in the disjunctive. See United States v.
Crisci, 273 F.3d 235, 239 (2d Cir. 2001). However, as we noted in
Thomas, to the extent that the Second Circuit implies the intent to
defraud requirement of subsection (1) to cases brought under
subsection (2), there is no meaningful difference in our
interpretation of the statute. See Thomas, 315 F.3d at 198 n.1
(citing United States v. Rodriguez, 140 F.3d 163, 167 n.2 (2d Cir.
1998) (noting that deceptive pattern of conduct designed to deceive
bank was required to prove case under either subsection (1) or
(2))). Accord United States v. Sprick, 233 F.3d 845, 852 (5th Cir.
2000); United States v. Davis, 989 F.2d 244, 246-47 (7th Cir.
1993). However, it appears that the Sixth Circuit has taken a
contrary view, holding that under subsection (2) of § 1344, there is
no requirement that the defendant intended to defraud the bank.
See United States v. Everett, 270 F.3d 986, 991 (6th Cir. 2001).

                                 15
erroneous disjunctive reading of § 1344.          The instructions
explained the two prongs of the bank fraud statute as follows:

             The bank fraud law provides that whoever
             knowingly executes or attempts to execute a scheme
             or artifice, one, to defraud a federally chartered or
             insured financial institution, or two, to obtain any of
             the moneys, funds, credits, assets, security or other
             property owned by or under the control or custody of
             a financial institution by means of false or fraudulent
             pretenses, representations or promises, shall be
             guilty of the crime of bank fraud.

             ...

             Members of the jury, the first element is that the
             government must prove beyond a reasonable doubt
             that there was a scheme or artifice to defraud a
             financial institution, or a scheme or artifice to obtain
             any of the money owned by or under the custody or
             control of a financial institution by means of false or
             fraudulent pretenses, representations or promises.

             The phrases, scheme or artifice to defraud, and
             scheme or artifice to obtain money, means any
             deliberate plan of action or course of conduct by
             which someone intends to deceive or cheat another,

                                16
              or by which someone intends to deprive another of
              something of value. A scheme or artifice includes a
              scheme to deprive another person of tangible, as well
              as intangible property rights.

App. at 2131a-2332a (emphasis added). Although the District
Court did no more than quote the plain language of both prongs of
§ 1344, the Defendants take issue with the highlighted language,
which they contend permitted the jury to convict on a disjunctive
reading of the statute in violation of Thomas. However, the
Defendants read the quoted paragraphs in isolation, ignoring the
District Court’s subsequent instructions with regard to the specific
intent requirement of § 1344. See Coyle, 63 F.3d at 1245 (noting
that the Court will “consider the totality of the instructions and not
a particular sentence or paragraph in isolation”).

       In particular, the District Court instructed the jury that:

              The second element of bank fraud, which the
              government must prove beyond a reasonable doubt,
              is that the defendants participated in the scheme to
              defraud with the intent to defraud. To act with an
              intent to defraud means to act knowingly and with
              the purpose to deceive or to cheat. An intent to
              defraud is ordinarily accompanied by a desire or a
              purpose to bring about gain or benefit to onself or
              some other person, or by a desire or a purpose to

                                 17
               cause some loss to some person. The intent element
               of bank fraud is an intent to deceive the bank in
               order to obtain from it money or other property.

App. at 2135a (emphasis added). This is in accord with the holding
of Thomas, that “the sine qua non of a bank fraud violation, no
matter what subdivision of the statute it is pled under, is the intent
to defraud the bank.” Thomas, 315 F.3d at 197.7 In Thomas, we
recognized that “[b]ank fraud may involve a scheme to take a
bank’s own funds, or it may involve a scheme to take funds merely

       7
         Our dissenting colleague contends that the “intent to
deceive the bank” instruction was too “isolated” from the
disjunctive reading of the statute, and was not otherwise given
when the jury asked the District Court to repeat the elements of
bank fraud. Dis. Op. at 4. With regard to the former contention,
we note that the District Court instructed the jury that the “intent to
defraud” element of § 1344 was defined as “intent to deceive the
bank in order to obtain from it money or other property.” If
anything, by clearly defining the mens rea element of § 1344 as
part of the charge on intent, the District Court amplified the
requirements of Thomas, rather than isolate it in the instructions,
as the dissent contends. As for the dissent’s latter contention, we
agree that the District Court only stated that “an intent to defraud”
was required. However, in this supplemental charge, the District
Court clearly indicated that it was only “reinstruct[ing] on the
elements of bank fraud.” App. at 2160a. It was not, however,
reinstructing on the definition of these elements. Id. (“If you want
the additional definitions of each of these terms that are used, then
you can go back out and put that on paper and ask for me to do
it.”). In these circumstances, we do not believe that the jury was
misinformed regarding the mens rea element of § 1344, when the
District Court previously clearly defined the “intent to defraud”
element as the “intent to deceive the bank in order to obtain from
it money or other property.”

                                  18
in a bank’s custody” so long as the government established the
requisite intent to defraud. 315 F.3d at 197 (emphasis added).
Here, the District Court did precisely that by properly instructing
the jury that guilt under § 1344 depended on a finding that the
Defendants had the requisite intent to defraud the banks.8

       The Defendants’ second argument is that the District Court
erroneously instructed the jury as to the intent or mens rea
requirement of § 1344. In particular, the District Court, while
instructing the jury that an “intent to deceive the bank in order to
obtain from it money or other property” must be shown, also stated
that an “[i]ntent to harm the bank is not required.” App. at 2135a.
Defendants contend that this was in error because conviction under
§ 1344 requires not only proof of an intent to defraud the bank, but
also of an intent to harm the bank. In making this argument,
Defendants once again rely on our decision in Thomas. However,
we do not believe that this case is controlled by Thomas; rather, we
believe it is controlled by our later decision in United States v.

       8
        The dissent focuses on the fact that the District Court
defined the mens rea element of § 1344 as an “intent to deceive the
bank in order to obtain from it money or other property,” as
opposed to “an intent to defraud the bank” in the language of
Thomas. Dis. Op. at 6. However, it is well-established that the
“intent to defraud the bank” element of § 1344 may be defined as
“an intent to deceive the bank in order to obtain from it money or
other property.” See United States v. Moran, 312 F.3d 480, 480
(1st Cir. 2002) (quoting United States v. Kenrick, 221 F.3d 19, 30
(1st Cir. 2000) (en banc)); see also United States v. Brandon, 298
F.3d 307, 311 (4th Cir. 2002); United States v. Lamarre, 248 F.3d
642, 649 (7th Cir. 2001); United States v. Hanson, 161 F.3d 896,
900 (5th Cir. 1998).

                                19
Khorozian, 333 F.3d 498 (3d Cir. 2003), which makes clear that
Thomas applies to a certain factual context not present here. We
explore both decisions in detail below.9
       In Thomas, the defendant was employed as a home health
care aide to an elderly account holder, who authorized Thomas to
complete pre-signed checks, by filling in the amount and name of
the payee, to pay for household necessities and other bills. Over a
nine- month period, Thomas made out several checks to cash or in
her own name allegedly for such purposes as the purchase of
groceries; however, in reality, the defendant pocketed the funds for
her own benefit. Evidence at trial indicated that the only victim of
the defendant’s fraud who suffered a loss was the account holder,
not the bank. On appeal, after holding that an intent to defraud the
bank was a necessary element of bank fraud regardless of what
subsection of § 1344 was pled, we endeavored to “decide the
thorny question of what is meant by the subsection (1) requirement
that the defendant intends to defraud the bank.” Thomas, 315 F.3d

       9
         The distinction between an intent to defraud a bank versus
the intent to harm or injure a bank is so subtle that it may well seem
trivial. In most contexts, one could understand an intent to defraud
a bank as the equivalent of an intent to harm the bank. For
instance, the mere act of defrauding a bank by passing false
information can be said to harm or injure a bank, as it denies the
bank an opportunity to make an informed business decision.
Nonetheless, in light of the Defendants’ argument and the District
Court’s juxtaposition of the intent to defraud instruction with the
intent to harm instruction, the subtle difference becomes apparent.
Were there a specific intent to harm element, a jury might not
convict a defendant whose intent was to enrich himself or steal
from a third party, yet who lacked any desire to harm or injure the
bank.

                                 20
at 199. We concluded that, in light of the legislative history that
“Congress sought to proscribe conduct that victimized banks . . . [,]
harm or loss to the bank must be contemplated by the wrongdoer
to make out a crime of bank fraud.” Id. at 200 (quotation and
citations omitted). Thus, under Thomas, conviction under § 1344
requires some proof that the perpetrator of the fraud intended to
cause loss or liability – harm – to the bank. Id. at 199 (holding that
“conduct, reprehensible as it may be, does not fall within the ambit
of the bank fraud statute when the intention of the wrongdoer is not
to defraud or expose to the bank to any loss but solely to defraud
the bank’s customer”). Because the record indicated that there was
no loss to the banks, let alone any intent to cause such a loss, we
reversed the defendant’s conviction for bank fraud. See id. at 202
(“Thomas’s actions, in fact, demonstrate that she never intended to
victimize the banks. Her only victim was [the elderly account
holder].”).10
       Subsequent to our decision in Thomas, we decided
Khorozian. In Khorozian, the defendant was charged with bank

       10
        Thomas does not specify whether the intent to cause loss
element is a general intent or specific intent requirement.
However, given Thomas’s use of the conduct/contemplate
language, we believe that Thomas understood it to be a general
intent requirement, and that § 1344’s only specific intent
requirement is the specific intent to defraud. 315 F.3d at 200
(“[H]arm or loss to the bank must be contemplated by the
wrongdoer to make out a crime of bank fraud.”) (citations omitted).
The “general intent standard typically only requires that a
defendant ‘possessed knowledge with respect to the actus reus of
the crime.’” Auguste v. Ridge, 395 F.3d 123, 145 & n.23 (3d Cir.
2005) (quoting Carter v. United States, 530 U.S. 255, 268 (2000)).

                                 21
fraud on account of her attempt to deposit $20 million in
counterfeit checks on behalf of an individual that she did not know.
As part of the fraudulent scheme, the defendant made
misrepresentations to the bank as to the purpose of the deposits as
well as the identity of the person who accompanied her during
visits to the bank. On appeal, we considered whether there was any
evidence of loss or liability to the bank, concluding that such a loss
existed by virtue of the fact that the bank, had it negotiated the
counterfeit checks, would have been exposed to a $20 million loss
under the UCC. Khorozian, 333 F.3d at 505 n.5. The defendant
argued that, because she did not know that the checks were
counterfeit, she had no intent to harm the bank. In response, we
cited with approval the First Circuit’s decision in United States v.
Moran, 312 F.3d 480 (1st Cir. 2002), for the proposition:
“Importantly, Moran held the defendants guilty even though they
did not specifically intend to cause the bank a loss (i.e., they
intended that the loans would be repaid), but rather intended only
to make misrepresentations that made a loss more likely.”
Khorozian, 333 F.3d at 505 (emphasis in original). Accordingly,
“§ 1344’s specific intent requirement is satisfied if an individual
commits an act that could put the bank at risk of loss.” Id. Thus,
Khorozian clarified Thomas’s holding regarding the mens rea
element of § 1344, making clear that intent to cause a loss or
liability, or an intent to harm the bank, is not required. Rather,
loss, or risk of loss, goes to the consequences of the fraudulent
scheme, and it need not be intended to satisfy § 1344’s mens rea
requirement of a specific intent to defraud a bank.

                                 22
       Khorozian went on to distinguish Thomas on its facts,
noting that Thomas and other similar cases “involved fraud on a
third party where the bank was merely an ‘unwitting
instrumentality’ in the fraud rather than the ‘target of deception.’”
Khorozian, 333 F.3d at 505 (quoting Thomas, 315 F.3d at 201)).
Accordingly, Khorozian limited Thomas’s requirement of an intent
to cause loss or liability to the bank to those situations where the
bank was merely an “unwitting instrumentality” of the fraud;
however, where the bank is a direct target of the deceptive conduct
or scheme, § 1344 is satisfied by proof of a specific intent to
defraud the bank plus fraudulent conduct (e.g., misrepresentations)
which creates an actual loss or a risk of loss. In other words, where
the fraudulent scheme targets the bank, there is no requirement that
the defendant intended to harm the bank or otherwise intended to
cause loss.

       We think the Khorozian rule is eminently sensible where the
bank is the “target of deception.” Id. at 505. The purpose of the
bank fraud statute is to protect the “financial integrity of [banking]
institutions.” See S. Rep. No. 98-225, at 377, reprinted in 1984
U.S.C.C.A.N. 3517. As we noted in Thomas, “Congress enacted
the bank fraud statute to fill gaps existing in federal jurisdiction
over ‘frauds in which the victims are financial institutions that are
federally created, controlled or insured.’” 315 F.3d at 197 (quoting
S. Rep. No. 98-225 at 377, reprinted in 1984 U.S.C.C.A.N. 3517).
In our view, where the bank is the “target of the deception,” it
makes no difference whether the perpetrator had an intent to harm

                                 23
the bank. Indeed, any conduct that causes loss or harm to a bank
is likely to undermine the public’s confidence in the integrity of a
bank, or otherwise adversely affect the bank’s public image,
regardless of whether the loss or harm was so intended. In these
circumstances, imposing an intent to harm requirement where the
bank is the “target of deception” would leave an unnecessary gap
in the reach of the bank fraud statute, which we think would
contradict Congress’ purpose as well as undermine the broad
federal interest in protecting financial institutions. Rather, proof of
a specific intent to defraud the bank is sufficient under Khorozian.

       However, where the bank is not the “target of deception,”
but rather merely an “unwitting instrumentality,” there is the
additional concern that § 1344 may be applied in a manner that
reaches conduct that falls well beyond the scope of what the statute
was intended to regulate. As we noted in Thomas, “[t]he deception
of a bank as an incidental part of a scheme primarily intended to
bilk a bank customer does not undermine the integrity of banking.”
315 F.3d at 200. Thus, to ensure that § 1344 was not applied to
conduct falling outside the scope of the bank fraud statute, we
imposed the additional requirement of proof of an “inten[t] to cause
a bank a loss or potential liability.” Id. at 201 (citing United States
v. Laljie, 184 F.3d 180, 191 (2d Cir. 1999)). Accordingly, where
the perpetrator had an intent to victimize the bank by exposing it to
loss or liability, such conduct falls comfortably within the reach of
§ 1344; however, where there is no evidence that the perpetrator
had an intent to victimize the bank, Thomas makes clear that

                                  24
merely an intent to victimize some third party does not render the
conduct actionable under § 1344.11
       We believe this case is clearly controlled by Khorozian.
The Defendants’ fraudulent conduct clearly targeted the banks, not
any third party such as the banks’ customers, the debtors from

       11
          There appears to be a disagreement in the circuits as to
whether an “intent to harm” is required under § 1344. For instance,
the First Circuit, sitting en banc in Kenrick, examined the common
law history of fraud and concluded that the “intent element of bank
fraud under either subsection [of § 1344] is an intent to deceive the
bank in order to obtain from it money or other property. ‘Intent to
harm’ is not required.” 221 F.3d at 29; see also id. (noting that
“[a]lthough it may ordinarily accompany a scheme to defraud a
bank, an ultimate ‘purpose of either causing some financial loss to
another or bringing about some financial gain to oneself’ is not the
essence of fraudulent intent. What counts is whether the defendant
intended to deceive the bank in order to obtain from it money or
other property, regardless of the ultimate purpose.”) (internal
citation omitted). In contrast, the Second Circuit has stated that “an
intent to harm” is an essential element of bank fraud, although it
appears that the Second Circuit interprets an “intent to harm” in a
manner that focuses principally on whether the fraudulent conduct
causes loss or a risk of loss. See United States v. Chandler, 98 F.3d
711, 715-16 (2d Cir. 1996) (no plain error where district court
failed to give “intent to harm” instruction; finding that the intent to
deceive is the functional equivalent of the essential finding of
intent to harm, and upholding conviction on grounds that the bank
“was necessarily exposed to a potential loss”); see also United
States v. Chacko, 169 F.3d 140, 148-49 (2d Cir. 1999) (holding
that an intent to harm can be inferred from conduct that “has the
effect of injuring as a necessary result of carrying it out”); Crisci,
273 F.3d at 240 (upholding bank fraud conviction where the
defendant cashed fraudulent checks with forged endorsements,
even though checks never presented to bank, on the grounds that
jury could find that he “intended to harm a bank”; dispositive of the
intent to victimize was the fact that the defendant’s conduct put the
bank at a risk of loss, not any intent to cause that loss.).

                                  25
whom the cars had been repossessed.               The Defendants
misrepresented to the banks that they would auction the cars at the
highest price; they diverted the cars to Carriage Trade’s inventory
despite their promises to the contrary; they prepared false bills of
sale that were sent to the banks; and they occasionally overstated
the extent of the physical damage of the cars to the banks in an
effort to justify the low prices. Thus, the banks in this case were
more than incidental victims or mere unwitting instrumentalities as
was the case in Thomas. Rather, like the bank in Khorozian, the
banks here were the direct targets of the misrepresentations and the
fraudulent scheme. Moreover, the Defendants had little, if any,
contact with the banks’ customers.

       The dissent disputes our reading of Khorozian, asserting that
it can be read “as being entirely faithful to Thomas.” Dis. Op. at
7-8. However, in our view, the dissent’s reading of Khorozian is
unpersuasive, as it ignores its language and holding.         While
Khorozian correctly notes that the specific intent element of § 1344
is the specific intent to defraud the bank, 333 F.3d at 503, nowhere
does the opinion expand the mens rea requirement, as the dissent
suggests, to also require an intent to cause risk of loss. This
reading of Khorozian is borne out by an examination of the First
Circuit’s decision in Moran, upon which Khorozian heavily relied,
which followed the First Circuit’s prior en banc unanimous
decision in Kenrick, which unambiguously concluded that there is
no intent to harm, or intent to cause loss, requirement under § 1344.

                                 26
Moran, 312 F.3d at 488-89 (citing Kenrick, 221 F.3d at 30).12

       Applying the foregoing principles to the jury instructions in
this case, we believe that the District Court did not err in
instructing the jury that “[i]ntent to harm the bank is not required.”
The jury instructions, taken as a whole, instructed the jury that an
intent to defraud the banks had to be found before the Defendants
could be convicted of bank fraud. See App. at 2135a (“The intent
element of bank fraud is an intent to deceive the bank in order to
obtain from it money or other property.”). Khorozian requires no
more with respect to the instruction of the jury as to § 1344’s intent
element.

       The Defendants allege one final error in the District Court’s
bank fraud instructions. In response to a written question from the

       12
         The dissent also contends that by failing to instruct the jury
that an intent “to victimize the bank” was required under § 1344,
the District Court’s instructions permitted the jury to convict under
an erroneous disjunctive reading of the bank fraud statute, and
more specifically, subsection (2), in violation of Thomas. Dis. Op.
at 5-6. We disagree. Thomas held, and Khorozian reaffirmed, that
the “sine qua non of a bank fraud violation, no matter what
subdivision of the statute it is pled under, is the intent to defraud
the bank.” Thomas, 315 F.3d at 197; Khorozian; 333 F.3d at 503.
Here, the District Court clearly instructed the jury that the mens rea
element of § 1344 was the “intent to deceive the bank in order to
obtain from it money or other property.” Given that the jury could
not convict the Defendants without a finding of such an intent,
there was simply no risk that the Defendants were convicted under
a disjunctive reading of the bank fraud statute. Accordingly, the
jury instructions were consistent with Thomas and Khorozian’s
holding that § 1344 must be read in the conjunctive.

                                  27
jury, the District Court provided a supplemental oral instruction
regarding the elements of bank fraud: “To prove a charge of bank
fraud, the defendant must establish each of the following elements
beyond a reasonable doubt.” See App. at 2160a (emphasis added).
Clearly, this was in error, as the burden of proof was on the
Government. Notably, the Defendants did not raise any objection
to this before the District Court, nor did they raise this error in their
opening briefs to this Court. Nevertheless, it is obvious that the
District Court’s mistaken use of the word “defendant” did not
constitute plain error as it could not have prejudiced the
Defendants. See United States v. Williams, 299 F.3d 250, 257 (3d
Cir. 2002) (no plain error where error does not cause prejudice).
When read in the context of the entire instructions to the jury, there
is no doubt that the jury understood that the burden of proof was on
the Government at all time to prove every element of the crime
charged.

       B.      The meaning of “fraud”

       The District Court instructed the jury, over Defendants’
objection, that the fraud element of a bank fraud conviction is
defined as follows:

               Members of the jury, the first element is that the
               government must prove beyond a reasonable doubt
               that there was a scheme or artifice to defraud a
               financial institution, or a scheme or artifice to obtain

                                   28
any of the money owned by or under the custody or
control of a financial institution by means of false or
fraudulent pretenses, representation or promises.

...

The    term    false    or   fraudulent     pretenses,
representations or promises, means a statement or an
assertion which concerns a material or important
fact, or material or important aspect of the matter in
question that was either known to be untrue at the
time that it was made or used, or that it was made or
used with reckless indifference as to whether it was,
in fact, true or false and made or used with the intent
to defraud.

...

The fraudulent nature of a scheme is not defined
according to any technical standards. Rather, the
measure of a fraud in any fraud case is whether the
scheme shows a departure from moral uprightness,
fundamental honesty, fair play and candid dealings
in a general light of the community.

Fraud embraces all of the means which human
ingenuity can devise to gain advantage over another

                  29
              by false representation, suggestions or suppression
              of truth or deliberate disregard or omission of truth.

App. at 2132a-2134a (emphasis added).            Focusing on the
emphasized sentence above, the Defendants contend that the jury
instruction defining fraud as a deviation from moral uprightness or
fairness was erroneous. In particular, the Defendants contend that
the instruction was too vague, permitting conduct to be
criminalized without sufficient specificity, and failing to ensure
that “ordinary people can understand what conduct is prohibited
and in a manner that does not encourage arbitrary and
discriminatory enforcement.” Kolender v. Lawson, 461 U.S. 352,
357 (1983). Second, the Defendants, citing United States v.
Lanier, contend that the instruction in question was overbroad to
the extent that it reached conduct that is not covered by § 1344,
thereby putting the court in the position of developing common law
crimes. See 520 U.S. 259, 267 n.6 (1997) (noting that courts are
not in the business of creating common law crimes, and that
“[f]ederal crimes are defined by Congress”).          Finally, the
Defendants contend that the instruction invited the jury to impose
purportedly objective criteria of morality and fairness to convict
them when, in fact, § 1344 requires proof that a defendant had the
specific intent to defraud.

       We have, in the past, defined fraud with reference to the
elastic concepts of morality and fairness when discussing the reach
of the federal fraud statutes. See United States v. Goldblatt, 813

                                30
F.2d 619, 624 (3d Cir. 1987) (“The term ‘scheme to defraud,’
however, is not capable of precise definition. Fraud instead is
measured in a particular case by determining whether the scheme
demonstrated a departure from fundamental honesty, moral
uprightness, or fair play and candid dealings in the general life of
the community.”); see also United States v. Trapillo, 130 F.3d 547,
550 n.3 (2d Cir. 1997); United States v. Schwartz, 899 F.2d 243,
246-47 (3d Cir. 1990); United States v. Keplinger, 776 F.2d 678,
698 (7th Cir. 1985); United States v. Bohonus, 628 F.2d 1167,
1171 (9th Cir. 1980); United States v. Van Dyke, 605 F.2d 220,
225 (6th Cir. 1979); United States v. Gregory, 253 F.2d 104, 109
(5th Cir. 1958). However, as a tool for construing the scope of the
federal fraud statutes, the formulation of fraud as a departure from
moral uprightness and fairness has come under increasing criticism.
In particular, the ambiguity inherent in concepts such as morality
and fairness has been thought to provide constitutionally
inadequate notice of what conduct is criminal, involve judges in the
creation of common law crimes, and place excessive discretion in
federal prosecutors. See United States v. Panarella, 277 F.3d 678,
698 (3d Cir. 2002) (noting that such formulations of fraud “do little
to allay fears that the federal fraud statutes give inadequate notice
of criminality and delegate to the judiciary impermissible broad
authority to delineate the contours of criminal liability”); Matter of
EDC, Inc., 930 F.2d 1275, 1281 (7th Cir. 1991) (noting that “[s]uch
hyperbole . . . must be taken with a grain of salt. Read literally it
would put federal judges in the business of creating new crimes;
federal criminal law would be the nation’s moral vanguard.”);

                                 31
United States v. Holzer, 816 F.2d 304, 309 (7th Cir. 1987) (noting
that the aforementioned definition of fraud “cannot have been
intended, and must not be taken literally. It is much too broad and,
given the ease of satisfying the mailing requirement [of mail fraud]
would put federal judges in the business of creating what in effect
would be common law crimes, i.e., crimes not defined by statute.”),
judgment vacated on other grounds, 484 U.S. 807 (1987); United
States v. Brown, 79 F.3d 1550, 1556 (11th Cir. 1996).

       Defendants correctly note that courts, including this one,
have typically used the morality and fairness formulation of fraud
only as a statement of statutory intent or as a means of defining the
scope of the federal fraud statutes; we have not, however,
examined the proprietary of using such language in jury
instructions.   We admit that the concerns we expressed in
Panarella, as well as by other courts, are magnified in the context
of jury instructions, as it is probable that the jury will be swayed by
elastic formulations of morality and fairness in the absence of
sufficient context and guidance from the court. Indeed, had the
highlighted language challenged by the Defendants been given to
the jury in isolation, we would be presented with a very different
matter, as it is plain that not every departure from moral
uprightness and fairness can or will constitute a scheme to defraud
within the meaning of the bank fraud statute.

       However, we cannot look at the challenged instruction in
isolation, as the Defendants do. We believe that the instructions,

                                  32
taken as a whole, properly instructed the jury as to the proof
required to establish a “scheme to defraud” as well as the
appropriate intent to defraud, which we have discussed previously.
The jury could not have convicted the Defendants merely for
failing to adhere to standards of moral uprightness or fundamental
honesty. Indeed, we note that this Court recently affirmed the use
of a very similar jury instruction in Khorozian, with the only
difference being the Khorozian instruction did not contain the
language “moral uprightness.”13 333 F.3d at 508-09 (scheme or
artifice may be found “where there has been a departure from basic
honesty, fair play and candid dealings”); see also United States v.
Frost, 125 F.3d 346, 371-72 (6th Cir. 1997) (upholding use of
similar formulation of fraud in context of detailed jury instruction
which, as a whole, provided that the jury could not convict
defendants merely for not having acted according to fundamental
honesty or moral uprightness”); United States v. Dobson, – F.3d –,
2005 WL 1949935, at *6 (3d Cir. Aug. 16, 2005) (affirming use of
instruction defining scheme to defraud as involving “a departure
from fundamental honesty, moral uprightedness, or fair play and
candid dealings in the general light of the community”). We

       13
         The dissent takes issue with our reliance on Khorozian,
noting that the problematic language “moral uprightness” was
missing from the Khorozian charge, and that Khorozian at least
involved a clear instruction on the specific intent element of 18
U.S.C. § 1344. See Dis. Op. at 14-15. As for the latter comment,
we have already noted that the jury in this matter was properly
instructed as to the mens rea element of 18 U.S.C. § 1344. As for
the former, we do not see how the mere inclusion of the phrase
“moral uprightness,” given the context of the entire jury charge,
rendered the instructions erroneous under Khorozian.

                                33
continue to have concerns regarding the definition of fraud with
reference to such abstract terms as morality and fairness. However,
we do not believe that this matter presented any real risk that the
District Court’s instruction invoking concepts of morality and
fairness, when read with the rest of the instructions, allowed for
conviction solely based on this formulation of fraud. Accordingly,
we find no error.

       C.      Good faith

       The Defendants requested an instruction that if the jury
found the Defendants to have acted in subjective good faith, they
must be found not guilty; the Defendants also requested an
instruction that the Government bore the burden of proving an
absence of good faith beyond a reasonable doubt. The District
Court refused to give the good faith instruction, reasoning that the
court’s instruction as to intent adequately covered the matter and
rendered a good faith instruction unnecessary. We reverse “a
district court’s denial to charge a specific jury instruction only
when the requested instruction was correct, not substantially
covered by the instructions given, and was so consequential that
the refusal to give the instruction was prejudicial to the defendant.”
United States v. Phillips, 959 F.2d 1187, 1191 (3d Cir. 1992).

       In United States v. Gross, 961 F.2d 1097 (3d Cir. 1992), we
held, adopting what has become the majority position among the
circuits, that a district court does not abuse its discretion in denying

                                  34
a good faith instruction where the instructions given already
contain a specific statement of the government’s burden to prove
the elements of a “knowledge” crime. Id. at 1102-03. In this
matter, the District Court’s instructions, taken as a whole,
adequately defined the elements of the crime, including the intent
requirement, thereby making a good faith instruction unnecessary
and redundant. If the jury found that the Defendants had acted in
good faith, it necessarily could not have found that the Defendants
had acted with the requisite scienter. Accordingly, any good faith
instruction would have been unnecessary and duplicative.14

       D.     Willful blindness

       Over the Defendants’ objection, the District Court issued a
willful blindness instruction to the jury:

              I further instruct you, members of the jury, that the

       14
         The Eighth and Tenth Circuits have held that a district
court abuses its discretion by refusing to give a good faith defense
charge even if the court has already given an instruction on the
elements of the crime. See United States v. Casperson, 773 F.2d
216, 223-24 (8th Cir. 1985); United States v. Hopkins, 744 F.2d
716, 718 (10th Cir. 1984) (en banc). Although the Defendants
request that this Court reconsider Gross, and adopt the position of
the Eighth and Tenth Circuits, we see no sound reasons to do so as
we continue to believe that Gross was correctly decided. In any
event, we note that the Eighth Circuit appears to have moved
towards the majority position. See Willis v. United States, 87 F.3d
1004, 1008 (8th Cir. 1996) (finding good faith instruction not
required, despite defendant’s request, where jury instructions
adequately conveyed specific intent requirement).

                                 35
              element of knowledge may be satisfied by inferences
              drawn from proof that a defendant deliberately
              closed his eyes to what would otherwise have been
              obvious to him.

              While a showing of negligence or a mistake is not
              sufficient to support a finding of willfulness or
              knowledge, a finding beyond a reasonable doubt of
              a conscious purpose to avoid learning the truth
              would permit an inference of knowledge. Stated
              another way, members of the jury, a defendant’s
              knowledge of a fact may be inferred from a
              deliberate or intentional ignorance of, or a willful
              blindness to, the existence of a fact. Deliberate
              ignorance is not a safe harbor for a defendant’s
              culpable conduct. It is entirely up to you, members
              of the jury, as to whether you find any deliberate
              closing of the eyes, and as to the inferences to be
              drawn from such evidence.

App. at 2135a-2136a. The Defendants do not challenge the legal
adequacy of the instruction as it was worded, but rather the
propriety of giving the instruction in this case. In particular, they
contend that there was no support in the record that any defendant,
or any person who could bind the corporate defendant Dantone,
had deliberately avoided learning about the fraudulent scheme.

                                 36
       A willful blindness instruction is often described as
sounding in “deliberate ignorance.” United States v. Wert-Ruiz,
228 F.3d 250, 255 (3d Cir. 2000). “We have upheld a district
court’s willful blindness instruction where the charge made clear
that the defendant himself was subjectively aware of the high
probability of the fact in question, and not merely that a reasonable
man would have been aware of the probability.” Khorozian, 333
F.3d at 508 (quoting United States v. Stewart, 185 F.3d 112, 126
(3d Cir. 1999)). A willful blindness instruction is also proper when
“[t]he jury could have found that [the] defendant deliberately
closed his eyes to what otherwise would have been obvious to
him.” Id. We have noted that it is not inconsistent to give a charge
as to both willful blindness and actual knowledge so long as the
willful blindness charge is supported by sufficient evidence. See
Wert-Ruiz, 228 F.3d at 255 (citation omitted). Accordingly, the
mere fact that the evidence supports a finding of actual knowledge
of a fact in question on the part of the Defendants does not bar the
District Court from also giving a willful blindness charge to the
jury so long as the record supports the provision of such an
instruction.

       On the record before us, we believe that there was sufficient
evidence to support the District Court’s willful blindness charge to
the jury. In particular, evidence presented at trial permitted a
finding by the jury that Dominic Conicelli, Sr., the sole shareholder
and president of Dantone, may have been deliberately ignorant to
the deceptive practices that Dantone was engaged in, or that the

                                 37
cars were not being auctioned as promised. For instance, in March
1995, one of the ten banks – Midlantic Bank – discovered that
Carriage Trade had apparently sold one of their automobiles to
Carol Leahy, the Defendant’s sister, for approximately $3,500
more than had been remitted to Midlantic as auction proceeds.
When confronted by Midlantic, Smith fabricated the story that the
car in question had extensive electrical damage in the amount of
$3,000 and had to be towed through auction, thus bringing in a low
price. Later, during a meeting between Midlantic and Conicelli,
Conicelli admitted that Smith had lied regarding the electrical
damage, becoming upset and offering to fire Leahy, yet he
continued to insist that the car in question had been auctioned,
rather than misappropriated by Carriage Trade and sold to Carol
Leahy.      While Conicelli’s statement could evidence actual
knowledge, it could also be read as suggesting a high probability
that Conicelli was deliberately ignorant of his employees’
fraudulent scheme, despite having learned facts indicating that the
Midlantic’s repossessed car had not been auctioned as represented
to the bank.

         The Government also points to testimony of an FBI special
agent at trial regarding his interview of Conicelli during a search
of the offices of Carriage Trade on March 5, 1996. The FBI agent
testified that, during the interview, he confronted Conicelli with
two sets of documents – the true bill of sale and the false bill of
sale for the Carol Leahy car.        When shown the documents,
Conicelli stated that he remembered the car and that he had

                                38
personally asked the dealer not to take possession of the car
because she had wanted to purchase it. The FBI agent then
proceeded to question Conicelli about other instances where an
automobile consigned to Carriage Trade for auction was in fact
never auctioned, but Conicelli denied having any knowledge of
such transactions. The FBI agent then informed Conicelli that
there may have been at least 150 instances where automobiles had
not been auctioned as represented to the banks but instead sold as
part of Carriage Trade’s inventory.       Conicelli responded by
expressing doubts about this and asked to see evidence of such
irregularities. When shown two such examples – bills of sale for
the same car, one false and one true, indicating that Carriage Trade
had sold the cars in a second sale to a buyer for a higher price than
what was reported to the bank – Conicelli reacted with denial and
disbelief, as the FBI agent testified at trial: “He said something to
the effect, I don’t know what the heck – I don’t remember these
cars.” App. at 1566a-67a. Based on Conicelli’s reaction to the
allegations made by the FBI agent, a jury could infer that, despite
his position with Carriage Trade, he was willfully blind to the
scheme his company and his employees were engaged in, despite
substantial documentary evidence of such a fraudulent scheme.

       Evidence relating to Leahy also supported a willful
blindness charge. At trial, it was shown that Leahy maintained a
detailed ledger which kept track of the profits of the fraudulent
scheme. Moreover, Kelly Gruver, an immunized former employee
of Carriage Trade who was responsible for preparing and mailing

                                 39
checks to the banks, testified that between 1993 and 1996, Leahy
would bring her bills of sale already filled out with the names of
the banks as sellers, third parties as buyers, and prices. Leahy told
her to enter the cars into Carriage Trade’s inventory and then send
checks to the banks, as if the cars had been auctioned. Despite this
conduct, counsel for Leahy argued at trial that the Defendant did
not know that the cars were being falsely auctioned, or that any of
his conduct, from maintaining the ledger or his instructions to
Gruver to issue checks to the banks while registering the cars in
Carriage Trade’s inventory, was fraudulent or deceptive. E.g.,
App. at 3180a, 3192a-3196a; see also Reply Br. of Leahy at 3, 8.
In our view, there is sufficient support in the record to justify a
willful blindness charge, as a jury could find that Leahy was aware
of certain facts which indicated that there was a high probability
that Carriage Trade was engaged in a scheme to defraud the banks,
and yet deliberately avoided learning about the fraudulent nature
of the scheme.15

       15
         Neither the Defendants, nor the Government, discuss the
evidence to support a willful blindness charge against Smith.
Assuming arguendo that the District Court’s provision of a willful
blindness instruction as to Smith was in error, we believe that,
given that the instruction itself contained the proper legal standard,
which the Defendants do not contest, and given the ample evidence
of actual knowledge on the part of all Defendants, as discussed in
Part IV infra, any error in the instructions would have been
harmless. See United States v. Mari, 47 F.3d 782, 785-86 (6th Cir.
1995) (holding that provision of a willful blindness charge that is
not supported by the record but that contains the proper legal
standard is harmless as a matter of law because the jury “will
consider the theory, and then dismiss it for what it is – mere
surplusage, a theory of scienter that is insufficient to support the

                                 40
       E.     Intangible Rights

       The District Court instructed the jury that “[a] scheme or
artifice includes a scheme to deprive another person of tangible, as
well as intangible property rights. Intangible property rights means
anything valued or considered to be a source of wealth, including,
for example, the right to honest services.” App. at 2132a-2133a.
Defendants contend that this instruction was in error because there
was no allegation anywhere in the Indictment nor any proof at trial
to support such an instruction. The Government concedes that the
intangible rights charge to the jury was in error, admitting that it
“never suggested to the jury an intangible rights theory; the case
was exclusively presented as a financial fraud.” See Gov’t Br. at
77.
       Defendants argue that they properly objected to the
provision of the intangible rights instruction.       However, we
disagree that any such objection was preserved as it is clear from
the record that defense counsel objected to other portions of the
bank fraud charge, such as the proper reading of § 1344, but not as
to the intangible rights charge. See United States v. Jake, 281 F.3d

conviction”) (citing Griffin v. United States, 502 U.S. 46 (1991));
United States v. Sasser, 974 F.2d 1544, 1553 (10th Cir. 1992)
(holding “that when sufficient evidence of a defendant’s guilt
exists, the tendering of a ‘willful blindness’ instruction is harmless
beyond a reasonable doubt even when the government does not
introduce evidence to support such a theory”); Mattingly v. United
States, 924 F.2d 785, 792 (8th Cir. 1991) (holding that erroneous
provision of willful blindness charge was harmless where there was
sufficient evidence to support actual knowledge); cf. United States
v. Syme, 276 F.3d 131, 136 (3d Cir. 2002) (citing Griffin).

                                 41
123, 130 (3d Cir. 2002) (“[A]n objection must . . . be sufficiently
precise to allow the trial court to address the concerns raised in the
objection. Thus, counsel must state distinctly the matter to which
that party objects and the grounds of the objection.”) (internal
citation and quotation omitted); see also United States v. Davis,
183 F.3d 231, 252 (3d Cir. 1999). Accordingly, we will apply
plain error review.

       To establish plain error, the Defendants bear the burden of
showing that (1) an error was committed; (2) the error was plain,
that is, clear and obvious; and (3) the error affected their substantial
rights. See United States v. Dixon, 308 F.3d 229, 234 (3d Cir.
2002); United States v. Vasquez, 271 F.3d 93, 99 (3d Cir. 2001)
(en banc). Once these elements are established, an appellate court
may exercise its discretion and reverse the forfeited error if “the
error [] seriously affects the fairness, integrity, or public reputation
of judicial proceedings.”       Dixon, 308 F.3d at 234 (internal
quotation omitted). We have previously cautioned that “it is a rare
case in which an improper instruction will justify reversal of a
criminal conviction when no objection has been made in the trial
court.” United States v. Gordon, 290 F.3d 539, 545 (3d Cir. 2002)
(internal quotation omitted).

       It is clear that the intangible rights instruction was given in
error as the Government did not present any evidence supporting
such an instruction, nor did it allege an “intangible rights” theory.
However, it is also clear that the erroneous instruction did not and

                                  42
could not cause any prejudice to the Defendants or diminish their
rights. See Williams, 299 F.3d at 257 (“An error affects the
substantial rights of a party if it is prejudicial.”). In particular, the
Government’s theory of the case was that the Defendants’ conduct
perpetrated a financial fraud on the banks, resulting in an actual
loss of more than $400,000, the approximate difference between
the false sales price and the actual price, as well as the risk of loss.
Moreover, the District Court properly instructed the jury that both
the scheme to defraud, as well as the intent to defraud, had to be
directed at the banks. Thus, in these circumstances, we do not
believe that a single erroneous jury instruction as to intangible
rights could have been a possible basis for the jury’s verdict. See
United States v. Saks, 964 F.2d 1514, 1522 (5th Cir. 1992) (finding
no plain error where erroneous intangible rights instruction given
to jury because government did not rely on or present evidence in
support of an intangible rights theory); United States v. Perholtz,
836 F.2d 554, 558-59 (D.C. Cir. 1987); cf. United States v. Holley,
23 F.3d 902, 910-11 (5th Cir. 1994).

       F.      Co-schemers’ liability

       The District Court instructed the jury, in accordance with
the Government’s request and over the Defendants’ objection, as
follows:

               I further instruct you, members of the jury, that you
               may consider acts knowingly done and statements

                                   43
              knowingly made by the defendants [sic] co-schemers
              during the existence of the scheme, and in
              furtherance of it as evidence pertaining to the
              defendants, even though they were done or made in
              the absence of and without the knowledge of the
              defendants.

              This includes acts done or statements made before
              the defendants had joined the conspiracy, for a
              person who knowingly, voluntarily and intentionally
              joins an existing scheme, is responsible for all of the
              conduct of the co-schemers from the beginning of the
              scheme.

              Acts and statements which are made before the
              scheme began or after it ended are admissible only
              against the person making them, and should not be
              considered by you against any other defendant.

App. at 2142-2143a (emphasis added). The Defendants contend
that the highlighted instruction – permitting the jury to attribute
acts and statements of a co-schemer to a defendant made prior to
the defendant’s entry into the scheme – was in error.

       While we have addressed the circumstances in which the
jury may be instructed that the acts and statements of a co-
conspirator may be attributed to a defendant for purposes of

                                44
determining guilt of the substantive offense, see United States v.
Lopez, 271 F.3d 472, 480 (3d Cir. 2001) (citing Pinkerton v.
United States, 328 U.S. 640, 647 (1946)), we have apparently not
yet addressed the circumstances in which a co-schemer instruction
may be properly given. We note, however, that the Ninth Circuit
has addressed co-schemers liability in some detail. See, e.g.,
United States v. Lothian, 976 F.2d 1257, 1262-63 (9th Cir. 1992);
United States v. Stapleton, 293 F.3d 1111, 1117 (9th Cir. 2002).
In particular, in a federal mail and wire fraud proceeding, the Ninth
Circuit explained: “Just as acts and statements of co-conspirators
are admissible against other conspirators, so too are the statements
and acts of co-participants in a scheme to defraud admissible
against other participants. We also apply similar principles of
vicarious liability. Like co-conspirators, ‘knowing participants in
the scheme are legally liable’ for their co-schemers use of the mails
or wires.” Stapleton, 293 F.3d at 1117 (quoting Lothian, 976 F.2d
at 1262-63). Nevertheless, under the approach of the Ninth Circuit,
the District Court’s instruction in this case may well have been
erroneous to the extent that it permitted the jury to consider acts
and statements of a co-schemer performed prior to the defendant’s
entry in the scheme. See Stapleton, 293 F.3d at 1117 (“The acts for
which a defendant is vicariously liable must have occurred during
the defendant’s knowing participation or must be an inevitable
consequence of actions taken while the defendant was a knowing
participant.”).

       However, assuming arguendo that the Ninth Circuit’s

                                 45
approach is correct, which we need not decide, any error here was
harmless on the facts of this case. Cf. United States v. Simon, 995
F.2d 1236, 1244-45 (3d Cir. 1993).16 Simply put, on the facts of
this case, there was no possibility that the jury could have
attributed the acts or statements of one co-schemer to another
defendant that were made prior to the defendant’s entry into the
scheme to defraud. The Indictment charged that the scheme to
defraud began in at least March 1993. Moreover, Edward Stigben,
a co-schemer with the Defendants, testified at trial that the
Defendants were involved in the scheme to defraud since at least
1991 or 1992. See App. at 447a, 451a. Moreover, the Government
did not present evidence of a scheme to defraud existing prior to
the Defendants’ involvement. Thus, as there was no evidence of
a prior scheme, the jury could not have attributed a co-schemer’s
acts or statements to the Defendants prior to the Defendants’ entry
into the scheme. Accordingly, any error in the District Court’s
instructions was harmless.

       16
         For purposes of harmless error review, in Simon, we noted
that erroneous jury instructions which are properly objected to may
be characterized as constitutional or non-constitutional in nature.
For non-constitutional errors, we have held that “unless the
appellate court believes it is highly probable that the error did not
affect the judgment, it should reverse.” Simon, 995 F.2d at 1244
(quotation and citation omitted). By contrast, for constitutional
errors, “the test is whether the evidence is so overwhelming that it
is beyond reasonable doubt that the verdict would have been the
same had the error not been committed.” Id. at 1245 (internal
quotation and citation omitted). Here, we need not decide whether
the co-schemers’ instruction, assuming it was erroneously given,
should be subject to constitutional or non-constitutional review as
we would arrive at the same conclusion under either test. Id.

                                 46
            IV. SUFFICIENCY OF THE EVIDENCE

       The Defendants contend that there was insufficient evidence
to sustain their bank fraud convictions on at least two grounds:
first, that there was no evidence that the banks suffered any loss as
a result of the scheme to defraud and, second, that there was no
evidence that they had any intent to defraud the banks as opposed
to the banks’ customers, the debtors from whom the cars had been
seized. “[A] claim of insufficiency of the evidence places a very
heavy burden on the appellant.” United States v. Dent, 149 F.3d
180, 187 (3d Cir. 1998). We must “view the evidence in the light
most favorable to the government, and will sustain the verdict if
any rational trier of fact could have found the essential elements of
the crime beyond a reasonable doubt.” See id. (citations and
quotations omitted). After reviewing the record in this matter, we
conclude that there was sufficient evidence to sustain the
Defendants’ convictions.

       A.     Evidence of loss by the banks

       As explained above, § 1344 requires that the fraudulent
scheme exposed the bank to some type of loss. E.g., Khorozian,
333 F.3d at 504-05. As an initial matter, we note that the loss or
liability that must be caused by the scheme to defraud can either be
an actual loss by the bank, or it can be a potential loss, what we
termed in Khorozian the “risk of loss.” Id. Nor is a financial loss
the only cognizable injury under the bank fraud statute: we have

                                 47
recognized that exposing a bank to civil liability is sufficient under
the bank fraud statute. See id. at 505 n.5 (noting that the UCC
makes a bank liable to a drawer of a check if it pays on a forged
indorsement). On the record before us, and viewing the evidence
in the light most favorable to the Government, there is sufficient
evidence to support the finding that the Defendants’ conduct
exposed the banks to a risk of loss.

       In particular, by not returning the full sale price of the
automobiles to the banks, the Defendants increased the amount of
the deficiencies that the banks had to collect from the banks’
customers indebted on the loans. One banker explained what was
meant by deficiency: “[t]he balance [of the loan to the borrower]
less the proceeds of the sale.” App. at 2896a. Given that the banks
were already dealing with customers who had defaulted on their
loan obligations, a jury could readily infer that the Defendants
conduct made it more likely that the banks would not be able to
collect the full deficiencies.

       Testimony at trial indicated that it was normal that after the
auction of an automobile, a deficiency on the outstanding loan
would still remain, and that it was rare for an auction to fetch a
price sufficient to cover the entire loan amount. Chris Mulvihill of
Midlantic Bank explained: “[w]hat would happen is the customer
would have a loan. The loan was generally more than the value of
the car was for. We would sell the car. Whatever we got for the
car, the customer had to pay that difference back.” App. at 1113a.

                                 48
Similarly, Louis Credle of the Police and Fire Federal Credit Union
testified that “[i]f we have to repo the car, then it goes to auction,
and then we have a default balance . . . [.] [T]hat would be
normal.” App. at 233a. Another banker also noted that “on one or
two rare occasions[,] a customer had so much equity in the car
when we sold it, they ended up getting money back, so that doesn’t
happen all the time. But it’s very rare.” App. at 151a.

       Because it was routine for the auction to yield a price
insufficient to cover the amount of the outstanding debt, bank
representatives testified that it was critical for the banks to get the
best possible price so as to minimize the amount of the deficiency.
For instance, one banker testified that his bank sent cars to the
auction “to minimize our cost on [those] vehicle[s] so that we could
attain a high value of return and cut our deficiency.” App. at 88a.
Another banker testified that, because each repossessed car was the
subject of a loan, obtaining the highest price at auction meant that
the bank “could eliminate the deficiency balance as much as
possible” and “reduce the loss on that loan.” App. at 2992a.
Similarly, another banker testified that it was important for the
bank to get the highest price possible at auction because lower
prices increased the amount of the deficiency the bank faced, a
balance that could ultimately have to be written off against the
banks’ reserves for loan losses. App. at 2883a, 2896a-97a; see also
App. at 1113a (testimony of bank representative that “we wanted
to sell the cars for the most amount we could in order to reduce the
bank’s losses”). Once the cars had been auctioned, the banks

                                  49
typically looked to the customer for satisfaction of any deficiency
balance. See App. at 2896a (testimony that following the auction,
the bank attempts “to make arrangements for him [the customer] to
pay the deficiency”). However, testimony at trial confirmed the
obvious proposition that the customers from whom the cars had
been repossessed, having failed once to pay their loan obligations,
were unlikely to pay additional money towards satisfying any
remaining deficiency. As one banker noted, it was important to get
the best price because “most of the time [the customers] are not
paying you.” App. at 110a. Viewing the evidence in the light most
favorable to the Government, a jury could readily infer that the
Defendants’ conduct, by increasing the amount of deficiency the
banks had to pursue from their riskiest customers, exposed the
banks to a risk of loss, i.e., the risk that the banks’ customers would
not be able to satisfy the greater deficiency balance.17

       Not only did the Defendants’ conduct expose the banks to
the risk of non-payment of a greater deficiency balance, the
Defendants’ conduct threatened to impair the banks’ ability to

       17
         We also reject the Defendants’ suggestion that because the
banks retained a legal remedy against the borrowers to collect any
outstanding deficiency, the banks could not be placed at a risk of
loss. The fact that a bank has the ability to pursue a legal remedy
to collect an unpaid deficiency against a debtor does not mean that,
in every instance, it would have done so, as it would have to weigh
the costs of litigating the deficiency claim versus the probability of
a favorable outcome. See United States v. Autorino, 381 F.3d 48,
53 (2d Cir. 2004) (noting that the FDIC’s protection against loss
under the UCC was undermined by the costs of pursuing legal
action).

                                  50
pursue legal remedies against the deficiency debtors. Article 9 of
the UCC requires a secured creditor to dispose of collateral in a
“commercially reasonable” manner. See 13 Pa. Cons. Stat. § 9504
recodified at 13 Pa. Cons. Stat. § 9610; N.J. Stat. Ann. § 12A:9-
504 recodified at N.J. Stat. Ann. § 12A:9-610. Indeed, bank
representatives testified that selling the automobiles in a
commercially reasonable manner was critical to preserving the
bank’s ability to seek a deficiency judgment in a subsequent
proceeding against the automobile’s owner. E.g., App. at 1113a
(“We also wanted to be able to exercise a commercially reasonable
sale, so that we could recover the deficiency balance for these
cars.”). The banks chose to consign the automobiles to Carriage
Trade for auction precisely because they sought to comply with the
requirements of state law. E.g., App. at 1114a (“We felt that [the
auction was best] because of the fact that there were more bidders
bidding on the car, that we would get a better price. These little
lots that were selling the vehicles generally was a handful of people
bidding on the cars, but literally hundreds of people attended the
auctions. So the idea was to have more action, more people
making bids on the car.”).

       However, the Defendants’ conduct deprived the banks of the
opportunity to dispose of their collateral in a “commercially
reasonable” manner, thereby exposing the banks to a risk that they
would be unable to pursue successful deficiency claims against
their debtor customers. For instance, one bank representative noted
that because all they had in their possession were the false bills of

                                 51
sale, which were evidence that the cars were effectively bought by
Carriage Trade for its own inventory at artificially low values, they
would have difficulty in court in establishing a claim for a
deficiency. See App. at 1125a (“We needed this documentation
that the auction provided, as I stated earlier, in order to be able to
collect the rest of the money that the customer may owe. And
certainly if the same auction that the car was auctioned at had
purchased the car, that would create a problem if we went to court
and tried to get that money back.”); App. at 1275a (noting that the
false bills of sale in the banks’ possession “didn’t reduce our
losses” but rather “increased our losses” because “if we had to go
to court ourselves, if were suing someone on a deficiency, we’d
have to have the bill of sale”); App. at 881a (noting that it was
important to demonstrate that the car had been sold for the most
money because it “showed that . . . it [the car] went to an auction
where they [the customer] know you didn’t give the car away, so
to speak”); App. at 1113a-14a (noting that a “commercially
reasonable” sale was important because “we were pursuing the
customer for the rest of the money that was owed” and “we needed
to be able to prove that we did the best job we could in selling the
car”).    Thus, the evidence supported a jury finding that the
Defendants’ conduct exposed the banks to a risk of loss in the
sense that the disposition of the collateral could be found to be
commercially unreasonable, thereby impairing the banks’ ability to
collect on any deficiency balances.

         Despite the evidence of risk of loss to the banks caused by

                                 52
the scheme to defraud, the Defendants insist that the Government
was required to introduce specific evidence as to each of the 311
cars that the banks in fact had a deficiency balance remaining
following Carriage Trade’s remittance of the fraudulent sales price.
In particular, the Defendants contend that because there is no
evidence that the banks suffered any uncollected deficiencies as to
the defaulted borrowers with respect to any of the 311 cars, the jury
could not infer whether a bank was harmed by less than the full
sale price the Defendants returned.18 We reject the Defendants’
argument because it conflates a showing of actual loss with the risk
of loss. Evidence of uncollected deficiencies with respect to each
of the 311 cars goes only to whether the banks suffered an actual
loss, in fact, on the deficiency balance; to the extent that some
banks may have successfully collected the higher deficiency
balances from the borrowers does not negate the fact that the
Defendants’ conduct exposed the banks to a risk of loss, i.e., the
threat of non-payment by the bank’s riskiest customers as well as
the impairment of the banks’ legal remedies to collect on the

       18
         One of the 311 cars was a 1994 Toyota, on which
Midlantic Bank was owed $14,102.49 on the loan by the car’s legal
owner and debtor. The car was improperly sold by Defendants to
Carol Leahy for $18,000, and Carriage Trade still paid $14,184 to
Midlantic Bank, which was greater than the remaining loan
obligation. In other words, Midlantic Bank recovered all of its debt
and was made whole with respect to this automobile. There was,
according to the Defendants, no actual loss suffered by Midlantic
Bank as a result of their conduct. Extrapolating from this example,
the Defendants contend that there was no evidence introduced by
the Government that, with respect to the vast majority of the cars,
the banks suffered any loss.

                                 53
deficiencies. See Khorozian, 333 F.3d at 505 n.6 (“That Hudson
United never actually suffered harm is also immaterial to
Khorozian’s defense. Section 1344 only requires that the bank be
placed at risk of loss.”); Monostra, 125 F.3d 183 at 188 (“As we
have noted in the past, the government need not show that the
banks actually incurred a loss in order to prove a scheme or artifice
to defraud.   Exposure to potential loss is sufficient.”).       The
evidence of the loan balances with respect to the 311 cars is
irrelevant to showing a risk of loss. The fact that the Defendants’
scheme to defraud may have fortuitously failed to impede the
banks’ ability to collect on some of the deficiencies does not mean
that the scheme did not involve a risk of loss to the banks.19

       19
          In addition to risk of loss, the Government argues that the
Defendants’ fraudulent scheme exposed the banks to an actual loss
in the amount of $418,657, the total difference pocketed by the
Defendants between the low sale price reported to the banks and
the actual sale price received by Carriage Trade. The Defendants,
however, contend that the $418,657 did not represent the actual
loss to the banks as the money properly belonged to the owners of
the automobiles, not the banks. In particular, the Defendants rely
extensively on Article 9 of the Uniform Commercial Code
(“UCC”) governing secured transactions and as adopted in
Pennsylvania and New Jersey, which rests title of repossessed
automobiles in the individual owners of the cars, not the banks.
Because the banks were not the legal owners of the 311
automobiles in question, the Defendants argue that the $418,657
was money that was taken from the legal owners of the automobile,
and not the banks. However, we need not reach this argument
because we have found sufficient evidence to support a risk of loss
to the banks.

        We do note that we are unpersuaded by the Defendants’
criticism of the Government’s statements at trial and in its brief to
this Court that the “[t]he cars did not belong to Carriage Trade,

                                 54
       Finally, the Defendants contend that not every bank
representative testified with sufficient clarity that his or her
particular bank was exposed to any risk of loss as a result of the
scheme to defraud. We disagree. Viewing the evidence in the light
most favorable to the Government, there was sufficient evidence
for a jury to infer that each bank faced a comparable risk of loss
from the Defendants’ fraudulent scheme. Certainly, there is no
requirement that each bank representative had to testify using the
magic words “risk of loss” to support a jury’s finding to this effect.
The Government’s evidence, taken as a whole, was sufficient to
support a jury finding of a risk of loss as to each bank.20

they belonged to the banks.” E.g., Gov’t Br. at 49. As the
Defendants correctly note, under the UCC as adopted in
Pennsylvania and New Jersey, the banks were not legal title
holders of the cars, but rather priority lien holders. That said, the
Government’s statement that the cars “belonged to the banks,” as
opposed to the cars’ legal owners or Carriage Trade, can hardly be
claimed to be erroneous. Indeed, the banks had lawfully
repossessed the automobiles from individuals who had defaulted on
their loan, and, accordingly, the banks’ interest in the automobiles
was far superior to any interest that the cars’ owners had remaining
after repossession. This is particularly true given that that banks
had the right to dispose of the cars as collateral for their loans
pursuant to “commercially reasonable” procedures. See 13 Pa.
Cons. Stat. § 9504 recodified at 13 Pa. Cons. Stat. § 9610; N.J.
Stat. Ann. § 12A:9-504 recodified at N.J. Stat. Ann. § 12A:9-610.
       20
         To avoid any confusion, we note that our decision not to
discuss whether the banks suffered an actual loss as a result of the
Defendants’ scheme should not be read as suggesting that no such
loss in fact occurred. Because we are vacating the Defendants’
sentences, on remand the District Court will have the opportunity
to determine whether the banks suffered an actual loss, and the
amount of that loss, for purposes of the Guidelines as well as

                                 55
       B.     Evidence of an intent to defraud the banks

       The Defendants contend that there was insufficient evidence
to support a finding that they had an intent to defraud the banks, as
opposed to the banks’ customers, the debtors on the car loans. We
disagree.

       Testimony at trial permitted the jury to infer that the
Defendants knew their conduct was fraudulent and deceptive
toward the banks and could cause loss to the banks. For instance,
most of the bank representatives testified that they never gave the
Defendants permission to purchase the cars for their own
inventories, and several bank representatives testified that they
affirmatively prohibited Defendants from purchasing the cars for
themselves. E.g., App. at 1155 (banker testified that he told the
Defendants numerous times “that they weren’t allowed to purchase
the cars”). As one banker explained, the reason why the banks did
not authorize Carriage Trade to purchase the cars for its own
inventory, despite several such requests, was that a direct sale to
Carriage Trade did not involve “competitive bidding” and
“[w]ithout competitive bidding, you really can’t establish a proper
deficiency.” App. at 1262a.

       Moreover, evidence at trial indicated that Carriage Trade

restitution. We note that the proof of actual loss for purposes of the
bank fraud conviction is not the same as proof of loss for purposes
of calculating “loss” under the Guidelines or for restitution, a point
which we consider in more detail in Part V.

                                 56
held itself out as an auction service able to obtain the best prices
for the automobiles in the quickest and most efficient manner. To
a large extent, the banks relied on Carriage Trade to value the cars
for purposes of resale in a manner that would fetch the best price.
As one bank representative testified, “we had no idea of knowing
what the condition [of the cars] was. We never saw the cars. And
. . . we never went to the auction so we had no idea what the cars
looked like. So we put our trust in them informing us of what the
condition was, which was pretty much how they based the value of
the car.” App. at 209a. Another banker testified: “I was pretty
much a layperson. What I know is that these people knew more
than me. I was relying heavily on them. They were in the
business. They were the professionals. They were telling me they
were getting the best prices for the car.” App. at 1194a-95a; see
also App. at 2821a (in opening statement, Government argued: “[i]t
was the defendants who held themselves out as being experts on
putting value on these cars so that they could be sold for the most
money.    Then the bank could put that money toward the
outstanding loan.”). From such evidence, a jury could find that the
Defendants knew they were under an obligation to obtain the
highest price for the cars and that failure to do so would violate
their agreements with the banks. Moreover, the Defendants’
argument that they lacked an intent to defraud the banks based on
the fact that they returned to the banks the “minimum floor” price
set by the banks for each of the 311 cars misses the point. The
banks clearly had an expectation, as the Defendants must have
known, that if a car was sold above the minimum floor, the banks,

                                57
not Carriage Trade, should receive the difference.

       The Defendants, however, contend that the Government
argued to the jury that their fraudulent scheme injured not only the
banks but also the banks’ customers, the debtors on the 311 cars.
By arguing that the debtors were the victims of the scheme, the
Defendants argue that the Government violated Thomas, which
requires that the banks be the intended victim of the bank fraud, as
opposed to some third party. However, we have already explained
earlier in Part III.A why Thomas’s “intent to victimize” language
is inapplicable to this case, as Khorozian makes clear that no
“intent to victimize” is required where the bank is the direct target
of the deceptive conduct. In any event, it is well-established that
a bank need not be the sole or immediate victim of the fraud. See
Moran, 312 F.3d at 489 (citation omitted), cited in Khorozian, 333
F.3d at 505; United States v. McNeill, 320 F.3d 1034, 1037 (9th
Cir. 2003); Brandon, 298 F.3d at 311 (citation omitted); Crisci, 273
F.3d at 240. So long as the defendant had an intent to defraud the
bank, and the bank suffered loss or risk of loss as a result of the
deceptive conduct, § 1344 is implicated even if a third party is also
injured as a result of the fraudulent conduct. See also McNeill, 320
F.3d at 1037 (noting that defendant’s deception “was plainly
directed at First Interstate Bank as well as at the IRS, and the
scheme to deceive the bank was essential to McNeill’s overall plan.
Thus, the bank was not merely an unwitting instrumentality of a
scheme to defraud the IRS, it was also a victim of [defendant’s]
deception.”); Crisci, 273 F.3d at 240 (holding that defendant “is not

                                 58
relieved of criminal liability for bank fraud because his primary
victim was the employer from which he embezzled funds by
submitting fraudulent check requests”).        Even if the banks’
customers were harmed as a result of the fraudulent scheme, there
is still ample evidence that the Defendants’ had an intent to defraud
the banks within the meaning of Khorozian.21

                   V. SENTENCING ISSUES

       The Defendants raise a number of arguments with respect
to their sentences, including the District Court’s application of
several sentencing enhancements under the Guidelines; the District
Court’s calculation of loss for purposes of the Guidelines; and the

       21
         We note in passing that we are unpersuaded by the
Defendants’ contention that the Government argued to the jury that
the primary victim of the fraudulent scheme to defraud were the
debtors as opposed to the banks. The Defendants pluck statements
from the record in isolation, without reference to context or the rest
of the record. However, any suggestion that the Government
argued this case on the theory that the borrowers were the victims
of the bank fraud is belied by the extensive record in this case,
which contains many examples of the Government’s theory that the
banks were the targets of the scheme and injured as a result of the
scheme. As just one example, in its closing argument, the
Government clearly argued that the banks were the intended targets
of the deception and the injured party: “this is a very simple
scheme. The defendants sent the banks false bills of sale, phony
documents. They lied to the banks when they said that their [the
banks’] cars had been sold at auction. They dummied up the
paperwork to fake the sales, and then they sent the bank a check for
the low phony purchase price.” App. at 3042a.

                                 59
District Court’s imposition of forfeiture and restitution orders. The
Defendants also contend that portions of their sentences violate the
Eighth Amendment’s Excessive Fines Clause. Finally, pursuant to
Booker, which was decided while this matter was pending,
Defendants assert that their Sixth Amendment rights were violated
i) by the imposition of their sentences under the Guidelines and ii)
by the District Court’s imposition of forfeiture and restitution based
on figures calculated by the court rather than by the jury or
admitted by the Defendants.

       Because the now-advisory Guidelines where mandatory at
the time of sentencing, pursuant to Booker we will vacate the
Defendants’ sentences and remand for further proceedings. See
Davis, 407 F.3d at 165. Our doing so eliminates the Eighth
Amendment Excessive Fines issue, as to which we express no
opinion. What remains is the Defendants’ argument that, under
Booker, Sixth Amendment protections apply to orders of forfeiture
and restitution. Bound by recent Third Circuit precedent,22 we hold
that the Supreme Court’s decision in Booker does not render the
forfeiture and restitution ordered against the Defendants
unconstitutional. Nonetheless, we will vacate the District Court’s
forfeiture and restitution orders so as to allow the District Court to
alter the amounts in the event that there arises an inconsistency
with the District Court’s revised Guidelines loss calculation.
Although we need not consider the Defendants’ calculation of loss
arguments on the merits because we have already resolved to

       22
         See note 1, supra.

                                 60
vacate as to this issue, we endeavor below to provide some
guidance on how to calculate loss for purposes of the Guidelines.

                         *       *       *
       The District Court, over the Defendants’ objections, found
the loss to the victim banks caused by the fraudulent scheme to be
$408,970, that is, $418,657 minus $4,687 for certain repair work
performed on the cars by the Defendants minus $5,000 that
Carriage Trade had paid to Midlantic Bank after its discovery of
the fraud. The Defendants contend that the loss calculation was in
error, particularly on the basis of our decision in United States v.
Dickler, 64 F.3d 818, 824-26 (3d Cir. 1995) (holding that, under
U.S.S.G. § 2F1.1, a victim’s loss should be calculated by
estimation of the actual loss to the victim; “the defendant’s gain
may be used only when it is not feasible to estimate the victim’s
loss and where there is some logical relationship between the
victim’s loss and the defendant’s gain so that the latter can
reasonably serve as a surrogate for the former.”). Because we will
vacate the Defendants’ sentences and remand for resentencing
pursuant to Booker, we will not consider the Defendants’
arguments in the first instance.     However, we make certain
observations in light of Dickler that the District Court should
consider on remand.

       We note that pursuant to the Federal Rules of Criminal
Procedure, a district court “must – for any disputed portion of the
presentence report or other controverted matter – rule on the

                                61
dispute or determine that a ruling is unnecessary either because the
matter will not affect sentencing, or because the court will not
consider the matter in sentencing.” Fed. R. Crim. P. 32(d)(i)(3)(B)
(2003). We have also previously noted that “[a] finding on a
disputed fact or a disclaimer of reliance upon a disputed fact must
be expressly made.” United States. v. Electrodyne Sys. Corp., 147
F.3d 250, 255 (3d Cir. 1998); see also United States v. Cherry, 10
F.3d 1003, 1013 (3d Cir. 1993). In this matter, it is clear that there
was a dispute between the asserted loss stated in the presentence
report and relied on by the Government, and the loss amount put
forth by the Defendants. However, having reviewed the District
Court’s oral decision at the loss hearing, we believe that the
District Court has not resolved with sufficient particularity or
specificity the disputes regarding the predicate factual elements for
the loss calculation. For instance, we are unable to determine
whether the District Court reached the $408,970 figure by
calculating the actual loss to the victim banks, or by using the
Defendants’ gain as a surrogate for the banks’ loss. Dickler
requires “some explanation of why an estimate of loss based on”
the Defendants’ data was not feasible. Id. at 827. Moreover, we
are unable to determine whether the District Court considered the
Defendants’ two-market theory, or the basis on which the District
Court rejected the Defendants’ evidence in this regard.

       Although the Government offers a spirited defense of the
District Court’s loss calculation, contending that the District Court
found the Defendants’ evidence of two markets as lacking in

                                 62
credibility and self-serving, on the record before us, we are not so
sure of the basis of the court’s ruling. For instance, the District
Court stated that it found “the testimony of the witnesses presented
[at the loss hearing], for the most part, lacked some credibility in
relationship to the issues here.” App. at 2385a. Moreover, the
District Court stated that it found the $408,970 amount “to be an
accurate and realistic valuation” of the 311 cars. App. at 2385a.
What aspects of the factual record the court found credible and
incredible is unclear, as is the basis of the District Court’s
conclusion that the loss amount was “accurate and realistic.”
Accordingly, on remand, the District Court has the opportunity to
reevaluate the evidence to arrive at a satisfactory determination of
the banks’ losses. However, lest there be any misunderstanding,
our decision should not be taken as prejudging the evidence or as
compelling a conclusion that the Defendants’ evidence must be
credited, a task for which, in any event, the District Court is best
suited.

                        VI. CONCLUSION

          For the foregoing reasons, we will affirm the judgments of
conviction of the District Court. However, we will vacate the
Defendants’ sentences and remand for further proceedings
consistent with this opinion.

Becker, Circuit Judge, concurring and dissenting.

                                  63
       I join fully in Parts II, III.C, III.E, III.F, and V of the
majority opinion. I join in Part III.D to the extent that it holds that
the willful blindness instruction was justified as to Defendant
Leahy and constituted harmless error as to Defendants Smith and
Dantone, although I will note my reservations regarding the use of
that instruction as to Dantone. I join in Part IV except to the extent
that it conflicts with my analysis of the elements of bank fraud, set
forth in detail below. I do not join in Parts III.A and B or in the
judgment because I believe that the majority’s resolution of the
bank fraud and moral uprightness jury charge issues is incorrect.
In particular, I think the majority’s discussion of the elements of
bank fraud is inconsistent with this Court’s decision in United
States v. Thomas, 315 F.3d 190 (3d Cir. 2002), a fair reading of
which compels the conclusion that the jury instructions used here
were erroneous.
                                  I.
       The majority finds that the jury instructions used in this case
were consistent with our decision in United States v. Thomas, 315
F.3d 190 (2002), which interpreted the federal bank fraud statute.
I disagree.
                                  A.
       The bank fraud statute reads:
       Whoever knowingly executes, or attempts to
       execute, a scheme or artifice—
               (1) to defraud a financial institution; or
               (2) to obtain any of the moneys, funds,
               credits, assets, securities, or other property

                                  64
              owned by, or under the custody or control of,
              a financial institution, by means of false or
              fraudulent pretenses, representations, or
              promises;

       shall be fined not more than $ 1,000,000 or
       imprisoned not more than 30 years, or both.

18 U.S.C. § 1344. In Thomas, we held that subsection (2) of the
statute cannot serve as an independent basis for conviction. Thus,
a defendant cannot be convicted of bank fraud solely because he
uses false pretenses to obtain money or property that is under the
bank’s custody but does not belong to the bank; rather, he must
also act to “defraud the bank,” thus subjecting him to liability
under subsection (1).       While we acknowledged that this
conjunctive reading was in tension with the plain disjunctive
language of the statute, we found that it was necessary to effectuate
to the statute’s purpose “‘to protect the federal government’s
interest as an insurer of financial institutions.’” 315 F.3d at 200
(quoting United States v. Davis, 989 F.2d 244, 247 (7th Cir.
1993)). As Thomas explained, if a defendant takes money that is
under the bank’s custody but does not belong to the bank, and in so
doing does not subject the bank to any risk of losing its own funds,
he has not threatened this interest and therefore has not committed
bank fraud.
       The District Court in this case, acting before our decision in
Thomas was issued, instructed the jury that either subsection of the

                                 65
bank fraud statute could serve as a basis for conviction. It stated:23
       The bank fraud law provides that whoever
       knowingly executes or attempts to execute a scheme
       or artifice, one, to defraud a federally chartered or
       insured financial institution, or two, to obtain any of
       the moneys, funds, credits, assets, security or other
       property owned by or under the control or custody of
       a financial institution by means of false or fraudulent
       pretenses, representations or promises, shall be
       guilty of the crime of bank fraud. . . .

       Members of the jury, the first element is that the
       government must prove beyond a reasonable doubt
       that there was a scheme or artifice to defraud a
       financial institution, or a scheme or artifice to obtain
       any of the money owned by or under the custody or
       control of a financial institution by means of false or
       fraudulent pretenses, representations or promises.

(emphasis added). Because the District Court instructed the jury
that it could convict under either subsection of the bank fraud
statute, it committed error under Thomas.24

       23
          Although Thomas was not yet decided when this case went
to trial, defendants nonetheless properly objected to the District
Court’s instruction.
       24
        I recognize the seeming perverseness of reversing a
conviction because the District Court instructed the jury by reading
excerpts from the relevant statute. But Thomas clearly stands for

                                 66
       The majority does not dispute that the above language,
standing alone, is inconsistent with Thomas. But it argues that the
District Court’s error is saved by a later portion of the charge: “The
intent element of bank fraud is an intent to deceive the bank in
order to obtain from it money or other property.” Maj. Op. at 13-
14. This instruction, the majority argues, precluded the jury from
convicting solely on the basis of subsection (2).
       I respectfully disagree. First, the intent instruction was an
isolated one, preceded and succeeded by the disjunctive language
quoted above. Indeed, when the jury later requested that the
District Court repeat the elements of bank fraud, the Court again
instructed the jury that it could convict under either subsection of
the statute and failed to repeat the sentence setting forth the intent
standard.25 Rather, it simply instructed the jury that it could

the proposition that the bank fraud statute is not to be given its
plain meaning.
       25
         The jury asked, “Can we have the criteria for bank fraud
again, please?” The District Court responded, in pertinent part:

       To prove a charge of bank fraud, the defendant [sic]
       must establish each of the following elements
       beyond a reasonable doubt. First, that the defendants
       knowingly executed a scheme or artifice to defraud
       a financial institution, or a scheme or artifice to
       obtain any of the money owned by or under the
       custody or control of a financial institution by means
       of false or fraudulent pretenses, representations, or
       promises.

       Second, that the defendants did so with the intent to
       defraud . . . .

                                 67
convict if it found that the defendants acted “with the intent to
defraud,” not, as we required in Thomas, “with the intent to defraud
the bank.” See 315 F.3d at 197.
       Second, the intent instruction simply did not preclude the
jury from convicting solely on the basis of subsection (2). As we
held in Thomas, a defendant who deceives a bank in order to obtain
from it money or property belonging to a third party (but in the
custody of the bank) does not commit bank fraud, unless he also
knowingly subjects the bank itself to a loss or risk of loss. But he
could easily have been convicted under these instructions, which
stated that “[t]he intent element of bank fraud is an intent to
deceive the bank in order to obtain from it money or other
property.”
       What these instructions lack is the critical element of bank
fraud identified in Thomas: namely, that the defendant must have
the intent “to victimize the bank,” see 315 F.3d at 198, 200, either
by taking the bank’s own funds or by putting the bank at a risk of
future loss or liability. As we held in Thomas, “Congress sought
to proscribe conduct that ‘victimize[d]’ banks, which suggests that
the bank must be deliberately harmed before the statute is violated.
We believe that, given the legislative intent, harm or loss to the
bank must be contemplated by the wrongdoer to make out a crime
of bank fraud.” Id. at 200. By not requiring such an intent, the
instructions permitted the jury to convict under subsection (2) of
the statute.
       As Thomas made clear, “the intent to defraud the bank”

(emphasis added).

                                68
requires more than merely “an intent to deceive the bank in order
to obtain from it money or other property.” See 315 F.3d at 200
(“The Government also suggests that mere ‘deceptive conduct’
toward the bank establishes intent to defraud. We disagree.”).
Indeed, Thomas herself had the “intent to deceive the bank in order
to obtain from it money or other property,”26 but we held that she
did not have the “intent to defraud the bank,” which, again,
requires an intent to “victimize” the bank by exposing it to a loss
or risk of loss. Thus Thomas could have been convicted under
these jury instructions, even though, as we held in that case, she did
not commit the crime of bank fraud. This fact alone should be
sufficient to demonstrate that the jury instructions in this case were
flawed.
                                 B.
       The majority makes an additional argument in order to
justify the jury instructions used in this case. According to the
majority, the mens rea requirement set forth in Thomas only
applies to some bank fraud. Other types of bank fraud—such as
that committed by the defendants in this case—are not subject to
Thomas’s mens rea requirement.
       The majority justifies its effort to cabin Thomas by arguing
that a later decision of this Court, United States v. Khorozian, 333

       26
        See 315 F.3d at 195 (“As Thomas admits in her
confession, her crime involved a pattern of activity intended to
deceive others, including acquiring [her victim’s] trust, making
deceptive misrepresentations to her, and some to the bank.”).
Moreover, the goal of her scheme was to obtain money from the
bank, even though the money in question belonged to her elderly
victim.

                                 69
F.3d 498 (3d Cir. 2003), created a distinction between those cases
that “involved fraud on a third party where the bank was merely an
‘unwitting instrumentality’ in the fraud” and those in which the
bank was itself the “target of deception.”       According to the
majority, only in the former case, where the bank is merely an
“unwitting instrumentality,” do we require “the additional
requirement of proof of an ‘inten[t] to cause a bank a loss or
potential liability.’” Maj. Op. at 19 (alteration in original). The
majority argues that in cases where the bank itself was the “target
of deception,” “proof of a specific intent to defraud the bank plus
fraudulent conduct (e.g., misrepresentations) which creates an
actual loss or a risk of loss.” Maj. Op. at 18. In such cases,
according to the majority, proof of an actual intent to cause the
bank a loss or risk of loss is not required.
       The argument is flawed for several reasons. First, it fails on
its own terms. The jury in this case was never required to find that
the conduct of the defendants “exposed the bank to . . . loss.” Maj.
Op. at 36. Thus, even if the majority’s legal standard were correct,
the jury instructions were insufficient.
       Second, I do not read Khorozian in the same way as the
majority. In fact, I read Khorozian as being entirely faithful to
Thomas. Khorozian simply stands for the proposition that the
intent to put the bank at a risk of loss is sufficient to violate the
bank fraud statute, even if there was no intent to cause an actual
loss. Indeed, we affirmed the jury instructions in Khorozian
because they “clearly instructed the jurors that they needed to find
specific intent to defraud in order to convict.” 333 F.3d at 508-09.

                                 70
Thus, nothing in Khorozian modified Thomas’s core holding that,
in order to be convicted of bank fraud, a defendant must act with
the intent to defraud the bank.
         To be sure, Khorozian found Thomas and other cases to be
“factually distinguishable because [they] involved fraud on a third
party where the bank was merely an ‘unwitting instrumentality’ in
the fraud rather than the ‘target of deception.’” See 333 F.3d at
505. The majority concludes that this statement modified the mens
rea requirement for bank fraud as set forth in Thomas. I disagree.
Again, the key issue in Khorozian was whether the intent to cause
a risk of loss to the bank was sufficient to convict under the bank
fraud statute. The above language from Khorozian simply stands
for the proposition that, in cases in which a bank is that “target of
deception,” it is perfectly reasonable for a jury to infer the requisite
intent absent direct evidence.
         It is for this reason that I join the majority’s conclusion that
the evidence in this case was sufficient to support a conviction.
But whether the evidence is sufficient to justify a conviction
(which was the issue in the portion of Khorozian relied on by the
majority) is a very different question from whether the jury
instructions communicated the proper legal standard. The answer
to the latter question is controlled by our decision in Thomas, and
I therefore conclude that the District Court’s instructions were in
error.
         Furthermore, the majority’s reading of Khorozian is clearly
foreclosed by Thomas. In Thomas, we held that a bank can be a
“target of deception” and still not be a victim of bank fraud if the

                                   71
defendant does not act with the requisite mens rea. As we stated
in that decision:
       [United States v. Laljie, 184 F.3d 180 (2d Cir. 1999)]
       illustrates the kind of distinction we make between
       schemes which victimize banks by exposing them to
       liability or loss, and schemes in which banks, despite
       being the target of deception, are mere “unwitting
       instrumentalities” to the fraud.27

315 F.3d at 201 (emphasis added). In the same vein, the Court also
stated, “Our holding that the statute is to be read conjunctively does
not end this matter. We must still decide the thorny question of
what is meant by the subsection (1) requirement that the defendant
intends to defraud the bank. . . . The Government also suggests that
mere “deceptive conduct” toward the bank establishes intent to
defraud. We disagree.” 315 F.3d at 199-200.
       Again, it is clear that the Thomas Court saw the bank in that
case as a “target of deception,” as the defendant deceived the bank

       27
         It was this language from Thomas that Khorozian relied on
in observing that Thomas and other cases were “factually
distinguishable because [they] involved fraud on a third party
where the bank was merely an ‘unwitting instrumentality’ in the
fraud rather than the ‘target of deception.’” 333 F.3d at 505. This
statement from Khorozian appears to rests on an erroneous reading
of the above language from Thomas. At all events, Khorozian did
not change the mens rea requirement for bank fraud, which was
clearly set out in Thomas.

                                 72
as to the purpose of the checks she sought to cash.28 In fact,
Thomas held that, unless a bank is the target of the scheme, the
defendant cannot be convicted of bank fraud at all. See id. at 198
(“[I]n order to prove bank fraud, a bank must be more than a mere
incidental player. A defendant must have deliberately targeted his
or her scheme at the banking institution.”). So while the majority
today holds that a defendant can be convicted of bank fraud if
either he targets his scheme at the bank or he acts with intent to
cause the bank a loss or risk of loss, Thomas, on which the
majority’s analysis purportedly rests, held that the defendant must
both target his scheme at the bank and intend to cause the bank a
loss or risk of loss.29
       Thus, the majority’s statement that Khorozian holds that
“intent to cause risk of loss” is not required, Maj. Op. at 20,
cannot be correct. This view is directly contrary to Thomas’ clear
command: the defendant must intend to cause harm or loss to the
bank. Thomas, 315 F.3d at 200. If the majority’s reading of
Khorozian were correct, then that decision would constitute an

       28
        For this reason, any suggestion that we can simply ignore
the problematic language in Thomas as dicta is misguided.
       29
         That Thomas held that merely causing a loss or risk of loss
is not sufficient is made clear near the end of the opinion:

       Moreover, even were there a colorable case for civil
       liability set forth here, it must also be shown that
       Thomas intended to victimize the bank. Even a
       scheme which does expose a bank to a loss must be
       so intended.

315 F.3d at 202.

                                73
impermissible attempt to overrule Thomas, and, under Third
Circuit Internal Operating Procedure 9.1, Thomas would remain
the law of this Circuit. See O. Hommel Co. v. Ferro Corp., 659
F.2d 340, 354 (3d Cir. 1981) (holding that, to the extent a later
decision conflicts with an earlier decision, the later decision “must
be deemed without effect.”).30 Thus, if the majority is correct and
Khorozian conflicts with Thomas, then Thomas, not Khorozian,
would prevail. Either way, the jury must find intent to cause the
bank a loss or risk of loss.
       The majority’s reliance on United States v. Moran, 312
F.3d 480, 489 (1st Cir. 2002), see Maj. Op. at 17, is also
misplaced. No matter what a different Circuit has held, the
Khorozian panel was bound by our prior decision in Thomas.31

       30
        Indeed, in questioning our assertion that Khorozian can be
read as being faithful to Thomas, Maj. Op. at 20, the majority
comes close to suggesting that Khorozian did overrule Thomas.
       31
         The majority goes so far as to claim that “it is well-
established that the ‘intent to defraud the bank’ element of § 1344
may be defined as ‘an intent to deceive the bank in order to obtain
from it money or other property.’” Maj. Op. at 15 n.8. In support
of this supposedly “well-established” principle, the majority does
not cite a single case that is controlling in this Circuit. See id.
(citing United States v. Moran, 312 F.3d 480, 489 (1st Cir. 2002);
United States v. Brandon, 298 F.3d 307, 311 (4th Cir. 2002);
United States v. Lamarre, 248 F.3d 642, 649 (7th Cir. 2001);
United States v. Hanson, 161 F.3d 896, 900 (5th Cir. 1998). What
is “well-established” in this Circuit is our decision in Thomas,
which held that “a defendant must intend to cause a bank a loss or
potential liability, whether by way of ‘statutory law, common law,
or business practice.’” 515 F.3d at 201 (citation omitted). Given
the unusual nature of our holding in Thomas—that a facially
disjunctive statute is to be read in the conjunctive—it is not

                                74
Moreover, in Moran, the First Circuit stated that the defendant
acted “with a clear motive to secure a financial windfall at the
bank’s potential expense.” Id. at 491. Thus, Moran does not hold,
as the majority suggests, that a defendant need only intend to make
misrepresentations to the bank.      See Maj. Op. at 17 (citing
Khorozian, 333 F.3d at 505). The defendant in Moran did more
than make misrepresentations to the bank: he acted with the intent
to harm the bank by exposing it to a risk of loss.

                                C.
       Finally, this error was not harmless. See Gov’t of Virgin
Islands v. Toto, 529 F.2d 278, 284 (3d Cir. 1976) (holding error
harmless if “it is highly probable that the error did not contribute
to the judgment”).     On the record, I cannot find that high
probability. I acknowledge that in Neder v. United States, 527
U.S. 1, 18 (1999), the Supreme Court found it was harmless error
for the jury instructions to have omitted an element of the criminal
offense where the “omitted element is supported by
uncontroverted evidence.” That is not this case here. Indeed, at
several points the government argued to the jury that the real
victims of the defendants’ actions were the banks’ customers.
       For these reasons, albeit reluctantly, I would set aside the

surprising that other courts would disagree. But the fact of their
disagreement does not render Thomas any less valid. And none of
the cases cited by the majority was decided by a court that reads
§ 1344 in the disjunctive. See United States v. Kenrick, 221 F.3d
19, 30 (1st Cir. 2000) (reading § 1344 in the disjunctive); United
States v. Moede, 48 F.3d 238, 241 n.4 (7th Cir. 1995) (same);
Brandon, 298 F.3d at 311 (same); Hanson, 161 F.3d at 900 (same).

                                75
convictions and remand for a new trial.

                                 II.
         The majority rightly acknowledges the dangers inherent in
using the standard of “moral uprightness and fairness” to define
fraud in a jury instruction. While noting the concerns trenchantly
expressed in United States v. Panarella, 277 F.3d 678 (3d Cir.
2002), the majority nevertheless upholds the charge in this case
because “the instructions, taken as a whole, properly instructed the
jury as to the proof required to establish a ‘scheme to defraud’ as
well as the appropriate intent to defraud. . . . The jury could not
have convicted the defendants merely for failing to adhere to
standards of moral uprightness or fundamental honesty.” Maj. Op.
at 25.
         In my view, the standard of “moral uprightness” has no
place in jury instructions defining fraud, as it broadens the federal
fraud statute in a manner that “give[s] inadequate notice of
criminality and delegate[s] to the judiciary impermissibly broad
authority to delineate the contours of criminal liability.”
Panarella, 277 F.3d at 698. Moreover, I am unpersuaded by the
fact that Khorozian, 333 F.3d at 508-09, upheld an instruction
which defined fraud as “a departure from basic honesty, fair play,
and candid dealings.” Khorozian approved of this instruction after
viewing the charge as a whole and determining that the
instructions were clear that specific intent to defraud must be
found to convict.
         In affirming the District Court’s reference to moral

                                 76
uprightness, the majority cites to United States v. Dobson, 419
F.3d 231 (3d Cir. 2005). See Maj. Op. at 26. In Dobson, a mail
fraud case, the District Court instructed the jury that a scheme to
defraud under 18 U.S.C. § 1341 is defined as “a departure from
fundamental honesty, moral uprightedness, or fair play and candid
dealings in the general light of the community.” Id at 239. We
reversed the defendant’s conviction, finding that the instructions,
taken as a whole, were inadequate. We stated in passing that the
reference to moral uprightness was not itself objectionable, but this
brief mention of moral uprightness provides virtually no support
for the majority’s position because (1) the statement was pure
dicta; (2) the panel was applying plain error analysis; (3) the issue
was not briefed by the litigants; and (4) the panel mentioned the
issue in a passing reference, without any discussion or analysis.
       I disagree that the jury instructions were so innocuous in
this case. We, of course, do not look to portions of the instructions
in isolation, and must consider them in their totality. See United
States v. Coyle, 63 F.3d 1239, 1245 (3d Cir. 1995). In my view,
however, the notion of “moral uprightness”—missing from the
instructions used in Khorozian—was central to the definition of
fraud in the jury instructions in this case, and thus I fail to see how
the remainder of the instructions cures this problem, or how it
could be considered harmless error under the applicable high
probability standard.32

       32
         I agree with the majority that the willful blindness
instruction was not erroneous as to Leahy, and that, while in error,
the instruction was harmless as to Smith. See Maj. Op. at 30-31
n.15. My only concern with the majority’s discussion of this point

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is that the majority concludes that the instruction—which
permitted the jury to infer that the element of knowledge could be
inferred based on proof that “a defendant deliberately closed his
eyes”—was justified primarily by the behavior of an individual
who was not a defendant. The majority approves of the charge
because there was evidence that Dominic Conicelli, Sr., the sole
shareholder and president of Dantone, Inc., was willfully blind to
the conduct of his employees. Conicelli’s knowledge was certainly
relevant to the question whether Dantone’s employees committed
bank fraud “within the scope of their employment” such that the
corporation could also be convicted. But the jury instruction
referred specifically to a “defendant’s knowledge of a fact.” The
jury could reasonably have assumed that the instruction was only
intended to apply to the individual defendants. Thus, to the extent
it was justified based on Conicelli’s conduct, the willful blindness
instruction was unnecessarily vague. Nevertheless, I conclude that
any error resulting from the instruction was harmless. See Maj.
Op. at 30-31 n.15.

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