Court Opinion

ID: 5125317
Source: CourtListenerOpinion
Date Created: 2021-11-11 21:00:57.014163+00
Date Added: 2024-06-11T08:22:49.475297
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                No. 18-30183
                 Plaintiff-Appellee,
                                            D.C. No.
                 v.                      3:15-cr-00238-
                                              SI-2
DIANA YATES,
               Defendant-Appellant.

UNITED STATES OF AMERICA,                No. 18-30184
                 Plaintiff-Appellee,
                                            D.C. No.
                 v.                      3:15-cr-00238-
                                              SI-1
DAN HEINE,
               Defendant-Appellant.        OPINION

      Appeal from the United States District Court
               for the District of Oregon
      Michael H. Simon, District Judge, Presiding

       Argued and Submitted December 10, 2020
                 Seattle, Washington

                 Filed October 8, 2021
2                   UNITED STATES V. YATES

       Before: Marsha S. Berzon, Eric D. Miller, and
              Daniel A. Bress, Circuit Judges.

                    Opinion by Judge Miller;
                     Dissent by Judge Bress

                          SUMMARY *

                          Criminal Law

    The panel vacated convictions and remanded for further
proceedings in a case in which a jury found Dan Heine and
Diana Yates, who were executives at the Bank of Oswego,
guilty of one count of conspiracy to commit bank fraud
(18 U.S.C. § 1349) and 12 counts of making a false bank
entry (18 U.S.C. § 1005).

    The government told the jury that Heine and Yates
conspired to deprive the bank of three property interests:
(1) accurate financial information in the bank’s books and
records, (2) the defendants’ salaries and bonuses, and (3) the
use of bank funds. Explaining that there is no cognizable
property interest in the ethereal right to accurate information,
the panel held that the accurate-information theory—which
was the cornerstone of the government’s case and which the
government conceded on appeal is invalid—is legally
insufficient. Emphasizing the distinction between a scheme
whose object is to obtain a new or higher salary and a scheme
whose object is to deceive an employer while continuing to

    *
      This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                  UNITED STATES V. YATES                     3

draw an existing salary, the panel held that the salary-
maintenance theory was also legally insufficient. The panel
held that even assuming the bank-funds theory was
presented to the jury and was valid, the government’s
reliance on the accurate-information and salary-maintenance
theories was not harmless in this case in which the jury
returned a general verdict. The panel therefore vacated both
defendants’ convictions on the conspiracy count.

    The panel held that because the conspiracy count is
invalid, the defendants’ convictions on the false-entry counts
must be vacated as well, given that the district court
instructed the jury that it could find the defendants guilty of
making false entries as co-conspirators. The panel wrote that
it would be inappropriate to consider harmless error sua
sponte in this case, and that there is no basis for remanding
to give the government an opportunity for a do-over after it
made the strategic choice not to address all of the
defendants’ arguments in its appellate brief.

    Heine and Yates argued that insufficient evidence
supports their false-entry convictions on counts 7–9, 13, and
15, which charged that Heine and Yates omitted certain
loans from the past-due loan balance on the Bank’s quarterly
FDIC call reports after arranging for third parties to make
delinquent payments. The panel considered the sufficiency
of the evidence on those counts because a finding of
insufficient evidence would bar retrial. The panel reviewed
the convictions on counts 7–9 de novo, Yates’s convictions
on counts 13 and 15 de novo, and Heine’s convictions on
counts 13 and 15 for plain error.

    The panel concluded that insufficient evidence supports
the convictions on counts 7–9 because the underlying loan
4                UNITED STATES V. YATES

payments made by another bank customer were not
themselves fictitious, so the entry at issue was not false.

   The panel similarly concluded that insufficient evidence
supports a finding of falsity on count 15, where a bank
employee made the required payment using his own money.
The panel held that the error was plain and affected Heine’s
substantial rights.

    The panel held that the convictions on Count 13, which
involved a loan to Chris Dudley, a former NBA player and
Oregon gubernatorial candidate, are supported by sufficient
evidence. To prevent his loan from being delinquent, Yates
directed that a payment be made from Dudley’s political
campaign account without Dudley’s knowledge and without
his permission. The panel wrote that the payment was not
what it was represented to be—an irrevocable commitment
by the payor to depart with funds and allow the bank to keep
the money in payment of an outstanding loan. Given that the
transaction was performed on the final business day of the
quarter, and Dudley’s testimony that a right of setoff did not
apply to the campaign account, the jury could have found
that the transaction was concocted for the very purpose of
distorting a financial statement, unauthorized, and subject to
being reversed.

    Dissenting, Judge Bress would have affirmed the
convictions in full. He wrote that the majority contradicts
governing precedents and improperly vacates convictions
that were premised on a valid legal theory, backed by
overwhelming proof of wrongdoing. He wrote that with no
challenge to any jury instructions and no serious challenge
to the admission of any evidence, this court exceeded its role
by setting aside defendants’ lawful conspiracy convictions.
As to the false bank entry convictions, he wrote that in
                 UNITED STATES V. YATES                   5

holding that no rational jury could convict defendants of
making false bank entries where the defendants were using
bank money to cure “past due” loans, thereby masking the
risk associated with the bank’s loan practices, the majority
departs from precedent while unduly limiting Congress’s
prohibition on false bank entries.

                       COUNSEL

Elizabeth G. Daily (argued), Assistant Federal Public
Defender; Stephen R. Sady, Chief Deputy Federal Public
Defender; Portland, Oregon; Kendra M. Matthews, Boise
Matthews Ewing LLP, Portland, Oregon; for Defendant-
Appellant.

David M. Lieberman (argued), Attorney; Brian C. Rabbitt,
Acting Assistant Attorney General; Criminal Division,
Appellate Section, United States Department of Justice,
Washington, D.C.; Clarie M. Fay, Michelle H. Kerin, and
Quinn P. Harrington, Assistant United States Attorneys;
Amy E. Potter, Criminal Appellate Chief; Billy J. Williams,
United States Attorney; United States Attorney’s Office,
Portland, Oregon; for Plaintiff-Appellee.
6                 UNITED STATES V. YATES

                          OPINION

MILLER, Circuit Judge:

    Dan Heine and Diana Yates were executives at the Bank
of Oswego in Lake Oswego, Oregon. After a 29-day trial, a
jury found Heine and Yates guilty of one count of conspiracy
to commit bank fraud and 12 counts of making a false bank
entry. But as the district court explained at sentencing, unlike
“your typical white-collar fraud case . . . neither defendant
directly tried to line their pockets as a result of their fraud.”
Indeed, the novelty of some of the government’s legal
theories led the district court to predict that the case could
result in “a really interesting appellate or Supreme Court
decision.”

    We leave that judgment to the reader. On the issues we
do need to decide, we agree with the defendants that two of
the government’s three theories of bank fraud were legally
inadequate and that presenting those theories was not
harmless. We therefore set aside the conspiracy conviction.
Without a conspiracy, the false-entry counts cannot stand
because the jury may have based its verdict on those counts
on a theory of co-conspirator liability. We separately
conclude that the evidence was insufficient to support the
jury’s guilty verdict on false-entry counts 7–9 and 15. We
therefore vacate all of the convictions and remand for further
proceedings.

                                I

   Heine founded the Bank of Oswego in 2004. Over the
next decade, he served as the bank’s president and chief
executive officer and as a member of the board of directors.
Yates also joined the bank at its founding, serving as its
executive vice president and chief financial officer until her
                  UNITED STATES V. YATES                     7

resignation in 2012. Over the years, Yates also served as the
bank’s chief operating officer and chief credit officer. Unlike
Heine, Yates was not a member of the board. Both Heine and
Yates served on the bank’s internal loan committee, which
met weekly to discuss the bank’s outstanding loans and to
decide whether to approve new loans. Particularly large
loans required the approval of the board of directors.

    As a new bank, the Bank of Oswego was closely
scrutinized by the Federal Deposit Insurance Corporation.
The FDIC requires banks to submit quarterly “call reports,”
public documents that include a bank’s balance sheet, its
income statement, and detailed information about its assets
and liabilities. While the bank’s controller was responsible
for preparing the call reports, Yates had to approve the
reports before they were submitted to the FDIC.

    In January 2009, the bank hired a vice president of
lending, Geoff Walsh. Walsh was a highly productive
employee. In a 2011 performance review, Heine described
him as a “rock star,” adding that his “personality, contacts
and intelligence” enabled the bank “to attract and serve
many professionals of high net worth and influence in the
Portland-metro area.” At the same time, Heine noted
“growing concern” with Walsh’s “apparent breach of
internal controls” and his failure to “follow[] sound lending
policy, procedures and practices.” Heine’s concern would
prove to be well-founded—Walsh’s conduct set in motion
the chain of events that would eventually lead to the
defendants’ convictions.

   The bank’s troubles began at the end of 2009 when the
FDIC reported disappointing results after an on-site
examination. Concluding that the bank’s overall financial
condition was “less than satisfactory,” the FDIC identified
“emerging weaknesses” in the bank’s asset quality and loan
8                 UNITED STATES V. YATES

portfolio. The agency also criticized the bank’s management
structure, expressing particular concern over its
concentration of responsibilities in Yates. The FDIC warned
that “[a] single individual’s ability to perform effectively in
all of these roles is questionable” and that “[s]uch a
concentration of responsibilities in one person . . . represents
a weakness in the bank’s internal control structure.” In 2010,
the bank entered into a memorandum of understanding with
the FDIC to address the agency’s concerns. But when the
FDIC returned to examine the bank early in 2011, it again
found the bank’s condition “less than satisfactory,”
downgrading its management score and concluding that
“CFO Diana Yates’ split attention is contributing to risks.”

    In January 2012, an independent auditor discovered that
Walsh had received personal loans from one of his clients,
Martin Kehoe. Kehoe was a “hard money lender” who made
non-bank loans to individuals at high interest rates. The
auditor immediately forwarded her findings to Heine and
Yates. Yates contacted Kehoe, who denied that Walsh had
ever borrowed money from him. Heine was unconvinced. In
his opinion, this was “a major issue” that had to be reported
to the board. Yates responded that Heine was overreacting.
Kehoe followed up with an email directly to Heine stating
that Walsh had not received any loans through Kehoe’s
business and had never been paid a fee for any customer
referrals.

    Meanwhile, the FDIC continued to criticize the bank’s
performance. When the agency completed its 2012
examination, it informed Heine and Yates that it planned to
downgrade the bank’s management score yet again.
According to Chris Shepanek, the chairman of the board of
directors, Yates became “extremely upset about the whole
situation,” was overwhelmed by the bank’s problems, and
                 UNITED STATES V. YATES                     9

felt that Heine failed to support her in meetings with the
FDIC. She resigned shortly thereafter.

    After Yates’s departure, Heine began reviewing Walsh’s
emails, forwarding items that concerned him to the board.
Eventually, Heine concluded that Walsh was involved in a
hard-money lending scheme funded by a $1.7 million loan
the bank had issued to Kehoe. Heine fired Walsh four days
later.

    In July 2013, Walsh was arrested and charged with
offenses unrelated to his work at the bank; he eventually
pleaded guilty to wire fraud and conspiracy to commit wire
fraud. But he also pleaded guilty to one count of conspiracy
to make a false bank entry in the course of his work at the
bank. Walsh cooperated with the government and provided
extensive testimony at Heine and Yates’s trial.

    In 2017, a grand jury returned a superseding indictment
charging Heine and Yates with one count of conspiracy to
commit bank fraud, in violation of 18 U.S.C. § 1349, and
18 counts of making a false bank entry, in violation of
18 U.S.C. § 1005. The indictment alleged that Heine and
Yates conspired “to conceal the true financial condition of
the Bank and to create a better financial picture of the Bank
[for] the Board of Directors, shareholders (current and
prospective), regulators and the public” by “report[ing] false
and misleading information about the performance of loans,
conceal[ing] information about the status of foreclosed
properties, ma[king] unauthorized transfers of Bank
proceeds, and fail[ing] to disclose material facts about loans
to Bank insiders to the Board of Directors, shareholders and
regulators.” The false-entry counts charged Heine and Yates
with “conceal[ing] and omitt[ing] from Call Reports and
Board of Directors’ Reports material information about
loans.”
10               UNITED STATES V. YATES

    At trial, the government argued that the defendants—
facing pressure from the FDIC and economic uncertainty
due to the 2008 financial crisis—had conspired to defraud
the bank. The government argued that Heine and Yates
carried out the conspiracy through three schemes:
(1) recruiting a bank employee named Daniel Williams to
make an undisclosed straw purchase of a property located on
A Avenue using bank funds; (2) arranging for third parties
to make payments on delinquent customer loans to bring
them current and then omitting those loans as delinquent on
the bank’s call reports; and (3) incorrectly accounting for
two properties after selling them to a customer named
Ronald Coleman and approving a loan to reconcile the error
without disclosing that purpose to the internal loan
committee.

    The jury found the defendants guilty of the conspiracy
count and 12 of the 18 false-entry counts. The district court
sentenced Heine to 24 months of imprisonment and Yates to
18 months of imprisonment.

                             II

     Count 1 of the indictment charged the defendants with
violating 18 U.S.C. § 1349, which makes it a crime to
“conspire[] to commit any offense under this chapter”—
here, bank fraud. Bank fraud entails “knowingly execut[ing]
. . . a scheme or artifice . . . to defraud a financial
institution.” Id. § 1344. A scheme to defraud “must be one
to deceive the bank and deprive it of something of value,”
that is, money or property. Shaw v. United States, 137 S. Ct.
462, 469 (2016); see id. at 466; see also Kelly v. United
States, 140 S. Ct. 1565, 1571–72 (2020); Neder v. United
States, 527 U.S. 1, 20–21 (1999) (construing “scheme or
artifice to defraud” identically for the mail, wire, and bank
fraud statutes). And that property deprivation “must play
                  UNITED STATES V. YATES                    11

more than some bit part in a scheme”—the loss to the victim
“must be an ‘object of the fraud,’” not a mere
“implementation cost[]” or “incidental byproduct of the
scheme.” Kelly, 140 S. Ct. at 1573–74 (quoting
Pasquantino v. United States, 544 U.S. 349, 355 (2005)).

    The government told the jury that Heine and Yates
conspired to deprive the bank of three property interests:
(1) “accurate financial information in the bank’s books and
records,” (2) “the defendants’ salaries [and] bonuses,” and
(3) “the use of bank funds.” Heine and Yates assert that the
government also presented a fourth theory: that they sought
to increase the value of their stock in the bank. They
correctly point out that an increase in the value of stock that
they owned could not be the object of bank fraud because it
would not deprive the bank of any property interest. The
government does not attempt to defend the stock-value
theory but denies having presented one. Although the
government said in closing argument that Heine and Yates
“desired that their stock go up,” that passing comment was
offered merely as an explanation of the motive for some of
the defendants’ conduct, not as an independent theory of the
object of the scheme. We therefore confine our analysis to
the three theories that the government argued to the jury.

    Reviewing de novo the district court’s denial of Heine’s
and Yates’s motions for judgment of acquittal, United
States v. Carey, 929 F.3d 1092, 1096 (9th Cir. 2019), we
hold that the government’s accurate-information and salary-
maintenance theories are legally insufficient, see United
States v. Barona, 56 F.3d 1087, 1097–98 (9th Cir. 1995), and
that presenting those theories to the jury was not harmless,
see Skilling v. United States, 561 U.S. 358, 414 & n.46
(2010). We therefore vacate both defendants’ convictions on
count 1.
12                UNITED STATES V. YATES

                              A

    The accurate-information theory was the cornerstone of
the government’s case. The indictment alleged that “[o]ne of
the purposes of the conspiracy”—and it specified only one—
“was to conceal the true financial condition of the Bank and
to create a better financial picture of the Bank” for the board
and regulators. In pretrial proceedings, the government
reiterated that “the primary purpose of the conspiracy . . .
was to conceal the information.”

      That theory was also the first one the government
advanced in closing argument. In discussing the “something
of value” requirement, the government told the jury that the
defendants “sought to deprive” the bank and the board of
directors of “accurate financial information in the bank’s
books and records.” Without that information, the
government argued, the board could not properly “analyze
the risks posed by the various borrowers who are late.” To
drive home the point, the government displayed a
PowerPoint slide entitled “Something of Value,” which
asserted that the defendants “sought to deprive [the] Bank
and [the board of directors] of accurate financial information
. . . to make the Bank’s books and records look better.” The
slide underscored that the information was valuable because
the board “relies on the accuracy of financial records to
perform its duties.”

    After the government’s closing argument, Heine
requested a curative instruction to the effect that “something
of value cannot be the accuracy of the information that was
the subject of the representation.” The government opposed
the instruction, saying, “We have always been clear that
[accurate information] is something that we think is
something of value.” The district court declined to give the
requested instruction or otherwise to instruct the jury on the
                  UNITED STATES V. YATES                    13

meaning of “something of value.” In posttrial proceedings,
the government continued to defend its position that
“depriving the bank of information” is “something of value.”

    The accurate-information theory is legally insufficient.
There is no cognizable property interest in “the ethereal right
to accurate information.” United States v. Sadler, 750 F.3d
585, 591 (6th Cir. 2014). Although a property right in trade
secrets or confidential business information can constitute
“something of value,” Carpenter v. United States, 484 U.S.
19, 26 (1987), “the right to make an informed business
decision” and the “intangible right to make an informed
lending decision” cannot, United States v. Lewis, 67 F.3d
225, 233 (9th Cir. 1995).

    Recognizing accurate information as property would
transform all deception into fraud. By definition, deception
entails depriving the victim of accurate information about
the subject of the deception. But “[i]ntent to deceive and
intent to defraud are not synonymous.” United States v.
Yermian, 468 U.S. 63, 73 n.12 (1984) (quoting United
States v. Godwin, 566 F.2d 975, 976 (5th Cir. 1978) (per
curiam)). Rather, “the scheme must be one to deceive the
bank and deprive it of something of value.” Shaw, 137 S. Ct.
at 469.

    The government conceded at oral argument that it was
no longer “defend[ing] that accurate information standing
alone is a cognizable interest.” Despite its repeated and
direct statements before the district court that accurate
information in itself constitutes “something of value,” the
government now argues that what it really meant was that
the defendants’ deception deprived the bank of its property
rights in restructuring delinquent loans and pursuing debt
collection. That was not the theory argued below, and we
cannot uphold the verdict on appeal “on a different theory
14                UNITED STATES V. YATES

than was ever presented to the jury.” McCormick v. United
States, 500 U.S. 257, 270 n.8 (1991).

    For that reason, the government’s reliance on United
States v. Ely, 142 F.3d 1113 (9th Cir. 1997), is misplaced.
There, we held that the right to collect a debt can constitute
a cognizable property interest. See id. at 1119; see also
Pasquantino, 544 U.S. at 356. But here, the government
argued that Heine and Yates deprived the bank of its right to
accurate information, not its right to collect borrowers’
debts. The deprivation of that intangible right cannot support
the convictions.

                              B

    The government also argued that Heine and Yates sought
to deprive the bank of their salaries and bonuses. Although
the indictment did not reference the theory, the government
raised it early in pretrial proceedings, arguing “that the
continuation of the benefits of employment . . . was a
purpose of the conspiracy.”

    The government led with the theory in its opening
statement at trial, inviting the jury to ask, “Why would Dan
Heine and Diana Yates misrepresent the condition of the
bank?” The government’s answer: to receive their salaries
and other financial compensation. The government
reiterated the theory at closing argument, emphasizing that
Heine and Yates “sought to ensure” their salaries and other
financial compensation in light of their personal financial
difficulties.

   When Heine requested a curative instruction on the
accurate-information theory after the government’s closing
argument, the government told the court that the defendants
“desired for the financial condition of the bank to look better
                 UNITED STATES V. YATES                   15

than it was so that they could get their own salaries and
compensation” because “they were in a dire cash situation.”
And in posttrial proceedings, the government again
explained that “[w]ith respect to something of value,” its
“theory is the salary piece.”

    Of course, salaries and “other financial employment
benefits” are both forms of “money.” United States v.
Ratcliff, 488 F.3d 639, 644 (5th Cir. 2007); accord United
States v. Del Valle, 674 F.3d 696, 704 (7th Cir. 2012). If
obtaining a new job or a higher salary is the object of a
defendant’s fraudulent scheme, then the deprivation of that
salary can in some circumstances support a fraud conviction.
See, e.g., United States v. Granberry, 908 F.2d 278, 280 (8th
Cir. 1990) (new job and salary from fraudulent job
application); United States v. Doherty, 867 F.2d 47, 55–56
(1st Cir. 1989) (Breyer, J.) (higher salary from a promotion
obtained under false pretenses).

     But there is a difference between a scheme whose object
is to obtain a new or higher salary and a scheme whose object
is to deceive an employer while continuing to draw an
existing salary—essentially, avoiding being fired. The
history of the Supreme Court’s treatment of fraud in the
employment context demonstrates why that distinction
matters.

    Before McNally v. United States, 483 U.S. 350 (1987),
federal courts had treated the breach of a duty owed to one’s
employer as a form of fraud, reasoning that it operated to
defraud the employer of the intangible right to the
employee’s honest services. See, e.g., United States v.
Bohonus, 628 F.2d 1167, 1172 (9th Cir. 1980); United
States v. Procter & Gamble Co., 47 F. Supp. 676, 678
(D. Mass. 1942). But in McNally, the Court “stopped the
development of the intangible-rights doctrine in its tracks,”
16                UNITED STATES V. YATES

construing the federal fraud statutes “as limited in scope to
the protection of property rights.” Skilling, 561 U.S. at 401–
02 (quoting McNally, 483 U.S. at 360). Dissenting alone on
this point, Justice Stevens argued that the Court’s distinction
made no sense because every time a person is “paid a salary
for his loyal services, any breach of that loyalty would
appear to carry with it some loss of money to the employer—
who is not getting what he paid for.” McNally, 483 U.S.
at 377 n.10 (Stevens, J., dissenting).

    The year after McNally, Congress enacted 18 U.S.C.
§ 1346, which criminalizes any “scheme or artifice to
deprive another of the intangible right of honest services.”
Read broadly, that statute would be too vague to satisfy the
Due Process Clause. See Skilling, 561 U.S. at 408–09. So to
avoid declaring the statute unconstitutional, the Court has
construed it to proscribe only the “core” of the pre-McNally
intangible-rights doctrine: “fraudulent schemes to deprive
another of honest services through bribes or kickbacks
supplied by a third party who had not been deceived.”
Skilling, 561 U.S. at 404. The Court has expressly rejected
the suggestion that section 1346 covers “undisclosed self-
dealing by a public official or private employee—i.e., the
taking of official action by the employee that furthers his
own undisclosed financial interests while purporting to act
in the interests of those to whom he owes a fiduciary duty.”
Id. at 409–10.

    In Skilling, for example, the government’s theory was
that Skilling had “conspir[ed] to defraud Enron’s
shareholders by misrepresenting the company’s fiscal
health, thereby artificially inflating its stock price,” and that
he had “profited from the fraudulent scheme . . . through the
receipt of salary and bonuses, . . . and through the sale of
approximately $200 million in Enron stock.” 561 U.S. at 413
                 UNITED STATES V. YATES                    17

(ellipses in original). But because there was no allegation
“that Skilling solicited or accepted side payments from a
third    party     in    exchange    for    making      these
misrepresentations,” the Court thought it “clear” that he had
not committed honest-services fraud. Id.

    Skilling’s rejection of the salary-maintenance theory is
persuasive here. To be sure, the government charged Heine
and Yates with conspiring to commit property fraud, not
honest-services fraud. But we do not believe the Court
intended “to let in through the back door the very
prosecution theory that [it] tossed out the front.” United
States v. Ochs, 842 F.2d 515, 527 (1st Cir. 1988). Permitting
the government to recharacterize schemes to defraud an
employer of one’s honest services—thereby profiting
“through the receipt of salary and bonuses,” Skilling,
561 U.S. at 413—as schemes to deprive the employer of a
property interest in the employee’s continued receipt of a
salary would work an impermissible “end-run” around the
Court’s holding in Skilling. Kelly, 140 S. Ct. at 1574.

    It also would criminalize a wide range of commonplace
conduct. See McDonnell v. United States, 136 S. Ct. 2355,
2373 (2016) (noting a due-process concern with the prospect
of “prosecution, without fair notice, for the most prosaic
interactions”). Consider an employee who wastes time on
the Internet but then, to avoid being fired, falsely claims to
have been working productively. Presented with that
scenario at oral argument, the government declined to say
whether the employee would be guilty of federal fraud on a
salary-maintenance theory. The government’s hesitation is
understandable. Extending the fraud statutes in that way
would raise serious concerns about whether the offense is
defined “with sufficient definiteness that ordinary people
can understand what conduct is prohibited and . . . in a
18                UNITED STATES V. YATES

manner that does not encourage arbitrary and discriminatory
enforcement.” Skilling, 561 U.S. at 402–03 (quoting
Kolender v. Lawson, 461 U.S. 352, 357 (1983)).

     We are not convinced that what Heine and Yates did is
meaningfully different—at least as it relates to their salaries
and bonuses—from the behavior of the Internet-surfing
employee. The government insists that the “defendants’
scheme went beyond an intent to maintain their salaries”
because “[t]he board of directors used a performance-based
system” of compensation; by making the bank’s
performance appear better than it actually was, Heine and
Yates obtained increased compensation. We agree that if an
employer offers a raise or a bonus tied to some specific
performance metric, an employee who lies about having
achieved that metric has deprived the employer of something
of value. But the evidence at trial showed that the defendants
were interested in receiving standard annual raises and end-
of-year bonuses that were based on the bank’s overall
financial condition, not on any specific metric they falsified
to obtain additional compensation. In practice, that seems
little different from deceiving an employer about working
productively. In any event, the government’s argument to the
jury did not distinguish between the maintenance of the
defendants’ existing salaries and the receipt of an increased
salary or bonus. As the government presented the case, it was
effectively an honest-services case dressed in the garb of
salary deprivation.

                              C

   The government’s remaining theory was that—as the
government put it in its closing argument—Heine and Yates
“misled the bank and the board of directors for the use of
bank funds to continue their conspiracy.” The jury could
have understood that statement to refer to the accurate-
                  UNITED STATES V. YATES                       19

information theory we have held not to be viable. And the
government said little more about the theory at trial.
Although it presented extensive evidence of the defendants’
misuse of bank funds, the phrase we have just quoted was its
only plausible reference to the possibility that depriving the
bank of funds might have been the object of the conspiracy.

    Assuming it was such a reference and not merely a repeat
of the accurate-information theory, we agree with the
government that a bank has a property interest in its funds
and that it “has the right to use [its] funds as a source of loans
that help the bank earn profits.” Shaw, 137 S. Ct. at 466. In
addition, a bank’s right to its funds extends to the “right to
decide how to use” those funds. Carpenter, 484 U.S. at 26.
So the fraudulent diversion of a bank’s funds for
unauthorized purposes certainly could be the basis for a
conviction under section 1344.

     Although the bank fraud statute “demands neither a
showing of ultimate financial loss nor a showing of intent to
cause financial loss,” Shaw, 137 S. Ct. at 467, it does demand
that the use of bank funds be an object of the scheme, Kelly,
140 S. Ct. at 1573–74. Heine and Yates emphasize that the
government argued below that the object of the fraud was
“to give the false appearance that The Bank of Oswego was
performing better than it was,” so that Heine and Yates could
maintain their salaries and bonuses at a time when they faced
personal financial difficulties. Relying on the Supreme
Court’s decision in Kelly, they insist that any effect on bank
funds was merely an “incidental byproduct” of their scheme.
Id. at 1573. And because the trial took place before Kelly was
decided, the jury instructions did not reflect Kelly’s
elaboration of the requirement that money or property be the
object of the scheme.
20                UNITED STATES V. YATES

    We need not consider whether or how Kelly might affect
this case. Instead, even assuming that the bank-funds theory
was presented to the jury and was valid, we still must
overturn the conspiracy conviction because the
government’s reliance on the accurate-information and
salary-maintenance theories was not harmless. As we have
explained—and as the government concedes with respect to
the accurate-information theory—both theories were legally
invalid. The Supreme Court has held that “constitutional
error occurs” when a jury “returns a general verdict that may
rest on a legally invalid theory.” Skilling, 561 U.S. at 414;
see Yates v. United States, 354 U.S. 298 (1957); United
States v. Garrido, 713 F.3d 985, 994 (9th Cir. 2013);
Barona, 56 F.3d at 1097–98. To determine that a
constitutional error was harmless, we “‘must be able to
declare a belief that it was harmless beyond a reasonable
doubt,’ in that it ‘did not contribute to the verdict obtained.’”
United States v. Holiday, 998 F.3d 888, 894 (9th Cir. 2021)
(quoting Chapman v. California, 386 U.S. 18, 24 (1967)).

    That standard is not satisfied here. As we have already
recounted at length, the accurate-information and salary-
maintenance theories did not make up just a few stray lines
on a PowerPoint slide at closing argument; they were the
focus of the entire prosecution from beginning to end. The
indictment charged the object of the conspiracy only as
“conceal[ing] the true financial condition of the Bank.”
Although the defendants were alleged to have made
“unauthorized transfers of Bank proceeds,” they did so,
according to the indictment, “[t]o achieve” their goal of
depriving the bank of accurate information regarding its
financial condition. The government repeatedly defended
the accurate-information and salary-maintenance theories
before the district court. In its closing argument, the
government’s explanation of “the reason why the
                  UNITED STATES V. YATES                     21

defendant[s] sought to deceive the bank” devoted all but half
of a sentence to those theories. By contrast, the government
referenced the bank-funds theory only once, commenting
that “throughout the course of the conspiracy,” Heine and
Yates “misled the bank and the board of directors for the use
of bank funds to continue their conspiracy”—itself a
statement that could be interpreted, consistent with the
indictment, as arguing that the defendants used bank funds
only to further their accurate-information and salary-
maintenance objectives. And the jury instructions, although
correct so far as they went, did nothing to define “something
of value” to preclude conviction under the government’s
invalid theories, despite the defendants’ request for an
instruction on that issue. In sum, the entire district court
proceedings “were permeated with the prohibited . . .
theor[ies].” Garrido, 713 F.3d at 998; see also id. at 996–98
(evaluating the harmlessness of an invalid legal theory by
examining the indictment, jury instructions, and closing
arguments).

    And the evidence of guilt was hardly so overwhelming
as to ensure that the jury could not have found in favor of the
defendants in the absence of the errors. See United States v.
Perez, 962 F.3d 420, 442 (9th Cir. 2020). To the contrary,
the evidence would have permitted the jury to find that Heine
and Yates’s scheme aimed to deprive the bank not of its
funds, but instead—just as the government argued
throughout the case—of their salaries and of accurate
information about the bank’s financial condition.
Significantly, the jury returned a split verdict and deliberated
for four days—facts that weigh against a finding of harmless
error. United States v. Obagi, 965 F.3d 993, 998 (9th Cir.
2020); United States v. Velarde-Gomez, 269 F.3d 1023,
1036 (9th Cir. 2001) (en banc). Thus, we are unable to say
22                UNITED STATES V. YATES

beyond a reasonable doubt that the invalid legal theories did
not contribute to the jury’s verdict.

    Bank executives considering engaging in fraud should
take no comfort from this result. Our decision in no way
limits the scope of sections 1344 and 1349 or the
government’s ability to bring prosecutions under those
statutes. We hold only that when the government devotes the
bulk of its presentation to two legally invalid theories of
guilt—the most prominent of which, it bears repeating, the
government now admits was invalid—we will not affirm a
general verdict simply because, had we been on the jury, we
might have found the defendants guilty on a third theory.

                               III

     Heine and Yates argue that because the conspiracy count
is invalid, their convictions on the false-entry counts must be
vacated as well. We agree.

    The district court instructed the jury that it could find the
defendants guilty of making false entries as principals, as
aiders and abettors, or as co-conspirators. Specifically, the
court instructed that “[e]ach member of a conspiracy is
responsible for the actions of the other conspirators
performed during the course and in furtherance of the
conspiracy,” as long as those actions “fell within the scope
of the unlawful conspiracy or agreement and could
reasonably have been foreseen.” Under Pinkerton v. United
States, 328 U.S. 640 (1946), that instruction correctly stated
the law. But Pinkerton liability depends on the existence of
a cognizable conspiracy; without a valid conspiracy count,
the Pinkerton theory cannot be a basis for the other
convictions. Emphasizing that point, Heine and Yates
argued in the body of their opening brief that the invalidity
of the conspiracy conviction “requires reversal of the false
                  UNITED STATES V. YATES                    23

bank entry counts because . . . the convictions may have
been based on the jury’s conclusion that each count was a
reasonably foreseeable consequence of the (invalid)
conspiracy count,” rather than on a conclusion that Heine
and Yates had any personal involvement in the false-entry
offenses.

    If the evidence at trial made it clear “beyond a reasonable
doubt that the jury in this case would have convicted . . .
based on principal or aider-and-abettor liability,” then the
Pinkerton instruction would have been harmless. United
States v. Manarite, 44 F.3d 1407, 1414 n.9 (9th Cir. 1995);
see United States v. Castaneda, 16 F.3d 1504, 1511–12 (9th
Cir. 1994). But despite the defendants’ express challenge to
the Pinkerton instruction as applied in the absence of a valid
conspiracy conviction, the government did not argue in its
brief before us that the instruction so applied was harmless.
The government did not overlook the point because the
defendants’ argument was somehow hidden; the defendants
stated that they were appealing their convictions “for one
count of conspiracy to commit bank fraud . . . and 12 counts
of making false bank entries,” and they presented their
argument in a section of their brief entitled, “[t]he district
court’s error in permitting the government to pursue invalid
theories of guilt requires reversal on all counts.” (emphasis
added; capitalization omitted).

    As a general rule, we decide only the issues presented to
us by the parties. See United States v. Sineneng-Smith, 140 S.
Ct. 1575, 1579 (2020). That rule reflects our limited role as
neutral arbiters of legal contentions presented to us, and it
avoids the potential for prejudice to parties who might
otherwise find themselves losing a case on the basis of an
argument to which they had no chance to respond. See id.
Harmless error is no exception to that general rule. See
24                UNITED STATES V. YATES

United States v. Rodriguez, 880 F.3d 1151, 1163 (9th Cir.
2018). Accordingly, we have held that a claim of harmless
error is subject to forfeiture, and that we will not consider it
when, as in this case, the government does not “advance a
developed theory about how the errors were harmless.” Id.
(quoting United States v. Murguia-Rodriguez, 815 F.3d 566,
572–73 (9th Cir. 2016)).

     Although we have discretion to consider harmless error
sua sponte, it would be inappropriate to do so here. In
deciding whether to consider a forfeited argument of
harmless error, we consider “the length and complexity of
the record,” “whether the harmlessness of an error is certain
or debatable,” and “the futility and costliness of reversal and
further litigation.” Rodriguez, 880 F.3d at 1164 (quoting
United States v. Brooks, 772 F.3d 1161, 1171 (9th Cir.
2014)). Here, the record is long and complex, the product of
a trial that featured 43 witnesses and 584 exhibits. Perhaps a
review of the record would reveal that the Pinkerton
instruction was indeed harmless with respect to some of the
counts even though the conspiracy conviction cannot stand,
but the answer is hardly certain: While Heine and Yates were
personally involved in making the reports charged as false
entries, they disputed the extent to which they understood
the true facts, were duped by Walsh, or actually made any
misstatement in response to the specific questions asked. It
would be unfair to Heine and Yates to resolve those disputes
on the basis of a theory that was not advanced by the
government and that they have not had an opportunity to
address. Nor is there any basis for remanding to give the
government an opportunity for a do-over after it made the
strategic choice not to address all of the defendants’
arguments in its appellate brief.
                  UNITED STATES V. YATES                    25

                              IV

    Heine and Yates argue that insufficient evidence
supports their false-entry convictions on counts 7–9, 13, and
15. Although we have already vacated all of the convictions,
we still must consider the sufficiency of the evidence on
these counts. A finding of insufficient evidence, unlike a
determination that the Pinkerton instruction could have been
erroneously applied in light of the invalidity of the
conspiracy conviction, would bar retrial. See United States
v. Gergen, 172 F.3d 719, 724–25 (9th Cir. 1999); United
States v. Bibbero, 749 F.2d 581, 585–86 (9th Cir. 1984).

    Both defendants preserved their challenges to counts 7–
9, so we review those convictions de novo. The government
argues that our review on counts 13 and 15 is for plain error
only. It is correct as to Heine. Although Heine moved for a
judgment of acquittal at the conclusion of the government’s
case on the ground that insufficient evidence supported his
false-entry charges, he “failed to renew [his] motion[] for
judgment of acquittal at the close of all the evidence” on this
point. United States v. Winslow, 962 F.2d 845, 850 (9th Cir.
1992). Yates, however, renewed her challenge to the
sufficiency of the evidence on all counts in her motion for
judgment of acquittal after the close of evidence.
Accordingly, our review of Yates’s convictions on counts 13
and 15 is de novo. See United States v. Boykin, 785 F.3d
1352, 1359 (9th Cir. 2015).

    We may reverse a conviction for insufficient evidence
only if, viewing the evidence in the light most favorable to
the government, no rational trier of fact could “find the
essential elements of the crime beyond a reasonable doubt.”
United States v. Stoddard, 150 F.3d 1140, 1144 (9th Cir.
1998). As relevant here, the elements of the offense under
section 1005 are (1) making a false entry in bank records or
26                UNITED STATES V. YATES

causing a false entry to be made, (2) knowing the entry was
false at the time it was made, and (3) intending that the entry
injure or deceive a bank or public official. United States v.
Wolf, 820 F.2d 1499, 1504 (9th Cir. 1987). The only
challenge here is to the first element.

                              A

     An entry is false if it “represent[s] what is not true or
does not exist.” United States v. Darby, 289 U.S. 224, 226
(1933) (quoting Agnew v. United States, 165 U.S. 36, 52
(1897)). Conversely, the offense of false entry “is not
committed where the transaction entered actually took place,
and is entered exactly as it occurred.” Coffin v. United
States, 156 U.S. 432, 463 (1895). That is so “even though it
is a part of a fraudulent or otherwise illegal scheme.” United
States v. Erickson, 601 F.2d 296, 302 (7th Cir. 1979); accord
United States v. Hardin, 841 F.2d 694, 699–700 (6th Cir.
1988); United States v. Manderson, 511 F.2d 179, 181 (5th
Cir. 1975).

    Coffin’s rule is subject to two important qualifications.
First, an entry is false, for purposes of section 1005, if it
omits material information or “vital fact[s]” requested by a
bank or regulator, even if the entry, on its face, is literally
true. Ely, 142 F.3d at 1119. For example, a loan application
that “d[oes] not reflect either the true borrower or the actual
purpose” of a loan omits material information and is
therefore false for purposes of section 1005. Wolf, 820 F.2d
at 1504. Thus, we held that the indictment in Ely stated an
offense because it alleged that the defendants gave only a
partial answer that omitted key facts when asked for the
purpose of the loan they sought; they said that they sought a
loan to obtain an “injection of capital to enable expansion of
business enterprises,” while their real reason was to be able
                  UNITED STATES V. YATES                      27

to make payments on their existing debts. Ely, 142 F.3d
at 1119.

    Second, an entry is false if it records a transaction that is
itself “false and fictitious, concocted for the very purpose of
distorting [a] financial statement”—as opposed to a
transaction that is merely a part of some broader fraudulent
or illegal scheme. United States v. Gleason, 616 F.2d 2, 29
(2d Cir. 1979); accord Erickson, 601 F.2d at 302. In Darby,
for example, the Supreme Court held that a bank entry that
recorded a promissory note bearing a signature known to be
forged was false because “[n]o note with such a signature
had been discounted by the bank.” 289 U.S. at 226. As
Justice Cardozo colorfully put it, “Verity was not imparted
to the entry by the simulacrum of a signature known to be
spurious.” Id. The entry was just as false as if “dollars known
to be counterfeit . . . ha[d] been entered in the books as cash,”
and it meant that “upon an inspection of [the] bank, public
officers and others would [not] discover in its books of
account a picture of its true condition.” Id.

    Applying that reasoning, we held in Hargreaves v.
United States, 75 F.2d 68 (9th Cir. 1935), that a bank
executive caused a false entry to be made when he directed
an uncompensated strawman to obtain a loan from the bank
without disclosing that the loan was for the executive’s
private benefit. See id. at 70, 72. The entry was false because
the transaction it memorialized—involving a strawman who
likely would not have qualified for the loan, never intended
to repay it, and immediately gave the proceeds to the
defendant—was itself fictitious. See id.; see also United
States v. Krepps, 605 F.2d 101, 109 (3d Cir. 1979).
28                UNITED STATES V. YATES

                              B

    Counts 7–9, 13, and 15 charge that Heine and Yates
omitted certain loans from the bank’s past-due loan balance
on its quarterly call reports after arranging for third parties
to make the delinquent payments. Heine and Yates argue that
they were correct not to report the loans as past due—and
thus that the call reports were not false—because the bank
had received real payments on the loans. In their view, it is
irrelevant whether a third party or the borrower made the
payment.

    The pertinent schedule to the FDIC’s call reports asks for
three pieces of information: a bank’s aggregate total of loans
past due for 30–89 days, the aggregate total of loans past due
for 90 days or more, and the aggregate total of non-
accruing—that is, delinquent—loans. In other words, it asks
for three numbers. The form does not call for a narrative
response, allow for comment, request a breakdown of the
particular loans that are past due, or ask for the source of a
payment on any of the underlying loans. The FDIC’s
detailed instructions for completing the schedule require a
loan “to be reported as past due when the borrower is in
arrears two or more monthly payments.”

    The government’s FDIC witness, Assistant Regional
Director Paul Worthing, confirmed at trial that the FDIC’s
instructions do not require a bank to disclose the source of a
payment on a loan or state that a loan remains past due if it
is paid by someone other than the borrower. Worthing also
conceded that there is no rule or regulation that would
prevent a third party—including a bank employee—from
making a loan payment on a customer account as a gift. He
testified only that the FDIC would find such transactions
“problematic” or “improper.”
                 UNITED STATES V. YATES                    29

                              1

    Counts 7–9 relate to loans to three bank customers:
Howard Abrams, Edward Duffy, and Robert Goodman. The
loans would have been delinquent, but Kehoe, another bank
customer, made the required payments. We conclude that
insufficient evidence supports the convictions on those
counts.

    The government emphasizes that Kehoe made the
payments using the proceeds of a loan that he himself had
obtained from the bank. But unlike the loans in Hargreaves
and Krepps, the loan to Kehoe was a real loan that was
approved by the board of directors, not a fictitious loan
disbursed for the defendants’ pecuniary gain. The loan
application disclosed that some of the proceeds would be
used for “hard money loans for non-consumer needs.” And
the board was aware that Kehoe loaned money to bank
customers, including Abrams, before it approved the loan.

    Once the loan was issued to Kehoe, the money was
Kehoe’s to use as he wished. He could invest it, spend it on
himself, or use it to make payments on other bank
customers’ loans. It is irrelevant that the customers were
unaware of the payments (or, in the case of Duffy, apparently
opposed to them)—the bank was entitled to payment, and
the customers had no right to refuse to make timely
payments on valid loans. When Kehoe made the payments,
the bank received real money, and the loans were no longer
delinquent. It was not false to report them as current. Nor is
there evidence that the loan Kehoe used to make the
payments was in arrears. So reporting the loans on which he
made payments as up to date did not conceal a net arrearage
in the funds lent by the bank.
30               UNITED STATES V. YATES

    The government insists that “a ‘past due’ loan means a
loan where the borrower had stopped making payment,”
suggesting that a loan might still be past due if someone else
made the payment. That view is contradicted by Worthing’s
testimony, which confirms that if a loan is current, no rule
requires it to be reported as past due simply because the
payment came from a third party. Indeed, the government
conceded at oral argument that, had the payment come from
a borrower’s grandmother, the entry would not have been
false. Kehoe may not have been anyone’s grandmother, but
the schedule did not ask whether the payment had been made
by the borrower, by the borrower’s grandmother, or by a
hard-money lender; it asked only whether the payment had
been made. It had. It may be that the FDIC would benefit
from knowing whether a borrower was personally
responsible for making a loan payment so that it can better
evaluate the soundness of a bank’s lending practices. If so,
the agency can revise its call report instructions to ask for
that information. The agency could also ask, although the
schedule at issue here did not, whether the payment was
made from the proceeds of another loan made by the bank—
but even on the current schedule, any arrearage in that loan
would have had to be included in the report.

     In this and in many of the other transactions at issue,
Heine and Yates displayed an economy with the truth that is
not much to their credit. But in the absence of any
requirement to disclose the omitted information, what is true
of perjury is true here as well: “[W]hen a statement is
literally true, it is, by definition, not false and cannot be
treated as such . . . , no matter what the defendant’s
subjective state of mind might have been.” United States v.
Aquino, 794 F.3d 1033, 1036 (9th Cir. 2015) (first alteration
in original) (quoting United States v. Castro, 704 F.3d 125,
139 (3d Cir. 2013)). Even if a transaction “is a part of a
                  UNITED STATES V. YATES                     31

fraudulent or otherwise illegal scheme,” it is not false to
report it as it occurred. Erickson, 601 F.2d at 302.

     Perhaps the government could have charged that
Kehoe’s loan application was false for omitting material
information about how he intended to use the money once
he received it. See Ely, 142 F.3d at 1119. But that is not what
it charged. It charged only that the aggregate total of past due
loans on the call report was false for omitting the Abrams,
Duffy, and Goodman loans from the total. Because the
underlying loan payments made by Kehoe were not
themselves fictitious, that entry was not false.

                               2

    Similarly, insufficient evidence supports a finding of
falsity on count 15, which involved a loan to another bank
customer, Chris Guettler, for which Walsh made a payment
using his own money. As Worthing testified, no FDIC rule
or regulation prohibited Walsh’s conduct. That Yates
instructed the bank’s controller to change the transaction’s
description to say “[s]omething more generic” is evidence of
her intent to deceive concerning the nature of the transaction,
but it has no bearing on whether the call report itself,
requiring only a report of the aggregate amount of past due
loans, was false. Because the required payment had been
made, the call report correctly omitted Guettler’s loan
balance from the bank’s aggregate total of past due loans,
and it was not false. We also conclude that, in light of the
instructions for completing the call report and Worthing’s
testimony, the insufficiency on count 15 is plain, and the
error affected Heine’s substantial rights. See United States v.
Olano, 507 U.S. 725, 732 (1993).
32               UNITED STATES V. YATES

                              3

    Count 13 is different. That count involved a loan to Chris
Dudley, a former NBA player and Oregon gubernatorial
candidate. To prevent his loan from being delinquent, Yates
directed that a payment be made without Dudley’s
knowledge from his political campaign account, called the
“Friends of Chris Dudley” account. Dudley did not give
permission for the bank to take funds out of his campaign
account to make the payment.

    We agree with the Seventh Circuit that “entries recording
unauthorized transactions involving the [bank] accounts of
customers without the knowledge or consent of the customer
or the institution” are false because the underlying
transactions are fictitious. United States v. Marquardt,
786 F.2d 771, 779 (7th Cir. 1986). Yates did not just make a
payment on Dudley’s loan without his knowledge or
approval, as Kehoe did for Abrams, Duffy, and Goodman.
That would not have been sufficient to show falsity. Instead,
Yates caused money to be taken out of the Friends of Chris
Dudley account without Dudley’s knowledge or approval to
be used for an unauthorized purpose. The transaction was a
sham; once Dudley found out about it, he could have
demanded that it be reversed and that the money be returned
to him. So reporting that money as a payment on Dudley’s
loan when the money should have remained in Dudley’s
account and could have been recovered from the loan
account was not truthful. The payment was not what it was
necessarily represented to be—an irrevocable commitment
by the payor to depart with funds and allow the bank to keep
the money in payment of an outstanding loan. And given that
the transaction was performed on the final business day of
the quarter, the jury could have found that it was “concocted
                  UNITED STATES V. YATES                    33

for the very purpose of distorting [a] financial statement”—
that quarter’s call report. Gleason, 616 F.2d at 29.

    At trial, Heine and Yates emphasized that the promissory
note for Dudley’s loan included a right of setoff “[t]o the
extent permitted by applicable law” in all of Dudley’s
accounts with the bank, meaning that the bank had
authorization to take funds from those accounts to pay his
loan balances. But Dudley testified that the right of setoff
applied only to his personal accounts and did not extend to
the “Friends of Chris Dudley” account. As no bank records
showed otherwise, the jury could have believed Dudley’s
testimony and concluded that the transaction was indeed
unauthorized and therefore subject to being reversed.

                          *   *    *

    Heine and Yates challenge various evidentiary rulings
and assert that the district court erred in calculating the
bank’s losses for sentencing purposes. Having vacated all of
the convictions, we do not consider those arguments.

   VACATED and REMANDED.

BRESS, Circuit Judge, dissenting:

    The defendants in this case, two bank executives,
fraudulently transferred money from their bank and then
surreptitiously re-routed it back in to disguise the bank’s
faltering finances. In doing so, they failed to disclose to the
bank’s Board and the FDIC the nature of their transactions.
The defendants’ conduct was not merely unsavory—it was
plainly unlawful.
34               UNITED STATES V. YATES

    Yet despite a nearly month-long jury trial involving
dozens of witnesses, the majority vacates defendants’
convictions for conspiracy to commit bank fraud, 18 U.S.C.
§ 1349, and making false bank entries, 18 U.S.C. § 1005. In
my view, the majority errs. A proper understanding of the
facts of this case and the mechanics of defendants’ scheme
confirms the verdict of the jurors who heard the evidence of
defendants’ misdeeds firsthand. Instead, the majority
contradicts governing precedents and improperly vacates
convictions that were premised on a valid legal theory,
backed by overwhelming proof of wrongdoing. With no
challenge to any of the jury instructions and no serious
challenge to the admission of any evidence, we have
exceeded our role by setting aside defendants’ lawful
conspiracy convictions.

    The majority’s decision to vacate defendants’ false bank
entry convictions is perhaps of even greater concern to me.
The defendants did not include in FDIC reports as “past due”
certain loans in which payments were made on behalf of the
borrowers. The problem was that the money used to pay
most of these loans had come from the bank itself—money
defendants fraudulently loaned out to a trusted “hard money
lender” who then paid the delinquent loans of the otherwise
“past due” borrowers, without these borrowers even
knowing. The defendants were using bank money to cure
“past due” loans, thereby masking the risk associated with
the bank’s loan practices. In holding that no rational jury
could convict defendants of making false bank entries under
these circumstances, the majority opinion again departs from
precedent while unduly limiting Congress’s prohibition on
false bank entries.

    Much of our nation’s powerful economy owes itself to
the integrity of its banks. Banking executives have positions
                  UNITED STATES V. YATES                    35

of unique trust and responsibility, particularly in their local
communities, as the defendants here did. The majority
opinion will, I fear, destabilize the public confidence on
which our country’s banking system depends and hobble the
principal federal laws designed to protect it. I respectfully
dissent.

                               I

    Dan Heine and Diana Yates had serious problems. The
Bank of Oswego—where Heine was CEO and a member of
the Board of Directors and Yates served as Executive Vice
President and Chief Financial Officer—was under close
scrutiny from the Federal Deposit Insurance Corporation
(FDIC). A 2009 FDIC examination concluded that the
“overall condition of the bank,” laden with underperforming
loans, was “less than satisfactory.” “Asset quality ha[d]
deteriorated,” “[e]arnings performance [was] weak,” and
there was “[i]nsufficient segregation of job responsibilities
at the senior management level,” which contributed to “the
increased risk profile of the institution.” In July 2010, the
FDIC required defendants to sign a memorandum of
understanding (“MOU”) on behalf of the bank, in which they
promised to reduce problematic assets, improve oversight of
lending and reporting practices, and increase reserve capital.

    In the meantime, Heine and Yates were dealing with
personal financial troubles of their own. Just before signing
the MOU, Heine was experiencing a “[s]erious cash flow
problem” and was borrowing heavily on his personal line of
credit at the bank. The following year, Heine was still
experiencing “cash flow pressure,” but, he told Yates, “[i]f
the bank does not fail, I should be fine in the end.”

   Yates was in a similarly perilous situation. The
government’s evidence showed she had substantial credit
36               UNITED STATES V. YATES

card debt, her checking account was routinely overdrawn,
and she was also borrowing from the bank to pay other bills.
Heine and Yates needed their bank to stay afloat, so that they
could stay afloat themselves.

     The confluence of the bank’s tenuous position before
federal regulators and Heine and Yates’s own precarious
finances set the stage for defendants’ elaborate efforts to
camouflage the bank’s financial picture. One of the most
striking features of the majority opinion, however, is what it
leaves out. The majority’s recitation of the government’s
case is at best a high-level summary that omits nearly all the
evidence of bank fraud presented in defendants’ month-long
trial, which featured dozens of witnesses and hundreds of
exhibits. In reviewing the jury’s verdict, “we are obliged to
construe the evidence in the light most favorable to the
prosecution.” United States v. Nevils, 598 F.3d 1158, 1161
(9th Cir. 2010) (quotations omitted). From the majority
opinion, one would have little idea what this evidence even
is.

    The government’s case centered on three interrelated
schemes. In each, defendants’ modus operandi was roughly
the same. Collaborating with Geoff Walsh—the bank’s Vice
President of Lending who later pleaded guilty and was a star
government witness—defendants would divert bank funds,
either by withdrawing the funds themselves or by
fraudulently sponsoring loans to third parties. Defendants
would then direct those funds through third parties and back
to the bank, using the returned money to wipe away
troubling features of the bank’s portfolio. In so doing,
defendants made the bank’s financial picture appear better
than it really was.

    I now lay out the key facts here in some detail because it
is important to understand defendants’ scheme to appreciate
                 UNITED STATES V. YATES                   37

why I believe the majority errs in vacating defendants’
convictions.

                             A

    The first scheme was a series of sham transactions
related to a Lake Oswego property called “A Avenue,” on
which the bank held a second mortgage. When the borrower
defaulted, the priority creditor foreclosed and sold A Avenue
to Fannie Mae in October 2010. As a non-priority creditor,
the bank had no recourse and no ownership interest in A
Avenue—meaning it would have to take a total loss on the
loan which would need to be disclosed to the FDIC.
Defendants were “very concerned” about this, so they
developed a highly unorthodox plan.

    Heine, Yates, and Walsh approached Danny Williams, a
junior credit analyst at the bank with a $30,000 annual
salary, and asked Williams if he would purchase A Avenue
from Fannie Mae “on behalf of the bank.” Fannie Mae
required that any prospective purchaser intend to live in the
home, which meant that the bank could not simply purchase
the property outright. To get around this, defendants
prevailed on Williams to serve as a straw purchaser.
Williams testified that the three executives explained to him
that the bank would fund Williams’s purchase of A Avenue.
If Fannie Mae discovered that Williams was a straw buyer,
the bank would cover any penalties. Williams agreed to
participate to “be the team player they wanted me to be.”

    Yates signed a letter in which she falsely attested to
Fannie Mae that Williams had sufficient funds to purchase
the home. Yates also drew from bank funds a cashier’s
check for $26,500, which Williams used to make a down
payment on A Avenue. A few days later, Yates drew a
second cashier’s check in the amount of $241,227—again,
38               UNITED STATES V. YATES

using bank funds—for Williams to complete the purchase.
The jury saw both checks, bearing Yates’s signature.
Williams signed the contract for A Avenue, and, on February
8, 2011, he obtained sole ownership of the property.

    After Williams had completed the purchase, Heine,
Yates, and Walsh went out to lunch and celebrated
(apparently Williams, who took one for the team, was not
invited). Heine emailed Yates that they “may have dodged
some bullets” by pulling off the A Avenue plan because they
would now likely “have [it] off the books by the end of
May.” Heine also conveyed to the Board, falsely, that the
bank had gained title to the property. Bank board member
Chris Shepanek testified that the Board was not informed
about Williams’s role in the transaction. Shepanek further
testified that a loan to a bank employee to buy a foreclosed
property “would be suspicious to me” and would have
required Board approval.

    The bank was required to submit quarterly “call reports”
to the FDIC disclosing certain financial information. Heine
and Yates were responsible for signing off on the bank’s call
reports every quarter. One item on the call reports was the
bank’s “Other Real Estate Owned” or OREO, which is
comprised of properties a bank acquires from borrowers
after foreclosure. Because OREO properties are acquired
after a borrower defaults on a loan, the loans on these
properties did not generate revenue. But having an OREO
property was better than having no property at all because at
least then the bank owned something.

    Once Williams used bank funds to buy A Avenue,
defendants on the next call report falsely listed A Avenue as
an OREO property that belonged to the bank, even though it
belonged to Williams. Williams never intended to live at A
Avenue; although he had certified to Fannie Mae that he
                 UNITED STATES V. YATES                   39

would reside there, he told the jury this was a “false
statement.” In May 2011, at the direction of Walsh,
Williams transferred A Avenue to the bank for no money via
quitclaim deed, and the bank quickly sold the property.

                             B

    Defendants were also required to include on FDIC call
reports loans that were past due by more than 30 days. FDIC
Regional Administrator Paul Worthing, who was involved
in the bank’s quarterly examinations, testified that the past
due loan balance is an “extremely important” metric on the
call report because whether “borrowers are not paying timely
or not paying” is “one of the biggest functional risk areas
that an institution manages.”

    The Bank of Oswego’s past due loan balance was a
source of great consternation for defendants and a frequent
topic of discussion within the bank’s Internal Loan
Committee (“ILC”), which defendants oversaw. The MOU
with the FDIC had placed specific emphasis on the bank’s
high-risk loans. Defendants therefore pushed hard to get
past-due loans “cleaned up” to avoid reporting them on the
call reports.

    Heine instructed loan officers to “[d]o whatever it takes
to get these things handled.” Defendants zealously followed
that approach. They deployed a highly irregular plan to use
bank and other funds to make loan payments on behalf of
delinquent borrowers, evidently without the borrowers even
knowing their debts were being covered. Defendants would
then treat these loans as “paid” and not include them as past
due on the FDIC call reports.

    At the center of this scheme was Martin Kehoe, who was
also a friend and longtime associate of Walsh. Kehoe was a
40               UNITED STATES V. YATES

“hard money lender” who gave out unsecured loans at high
interest rates on a handshake basis to people who could not
qualify for loans from traditional institutions. The bank’s
Board later discovered that Walsh was also borrowing
money from Kehoe and taking money from Kehoe’s line of
credit at the bank for Walsh’s own personal use. Ultimately,
in May 2012, the bank fired Walsh for his dealings with
Kehoe.

    In September 2010, Yates circulated to the bank’s Board
for approval a loan application for Kehoe in the amount of
$1.7 million. During ILC discussions, and with defendants
present, “it was made known” that upon receiving the loan,
some of the proceeds would then be used to pay the
delinquent loans of other bank customers, specifically
Howard Abrams and Edward Duffy. Walsh’s notes from
ILC meetings recorded “whose payments I’m going to make
out of Marty’s loan when it closes.” The closing documents
that Kehoe ultimately signed included an acknowledgment
“that it was okay [for the bank] to take the payment from his
credit line” to pay down the delinquent loan of another bank
customer.

    But the presentation Yates gave to the Board seeking
approval of the $1.7 million loan concealed this purpose.
The Board—which already had independent concerns about
the size of the loan and had a “robust discussion” on that
issue—was not told that the Kehoe loan would be used to
pay the delinquent loans of other customers. Yates’s
presentation to the Board did not mention that point.

    There was something else defendants were concealing
about Kehoe too. Yates had previously approved a $675,000
wire transfer to Kehoe back in July 2010, months before
presenting the $1.7 million loan application to the Board.
Walsh and Yates had sent Kehoe the $675,000 just one
                  UNITED STATES V. YATES                    41

month after signing the MOU, even though Kehoe’s existing
line of credit lacked sufficient funds to cover that draw. This
had caused the bank’s books to go out of balance for months.

    The Board first learned of the $675,00 wire transfer
during the internal investigation after Walsh was fired.
Defendants had not consulted the Board, conducted a proper
credit investigation, or required Kehoe to sign appropriate
loan paperwork before sending him the $675,000. An FBI
detective who interviewed Yates testified that Yates
confirmed she authorized the wire transfer. But Yates could
not give investigators an explanation for why this money
was sent to Kehoe. As soon as the $1.7 million loan closed,
Kehoe redirected $675,000 back to the bank to balance its
books—another purpose of the $1.7 million loan that was
not disclosed to the Board.

    On the same day that the $1.7 million loan closed, Walsh
began using the remainder of the Kehoe loan proceeds to
make payments directly from Kehoe’s account on behalf of
other delinquent bank customers, as defendants had
previously agreed. Walsh started with the loan of Howard
Abrams, a bank customer who consistently “struggle[d]” to
make his payments and who had been discussed at ILC
meetings as a good use of the Kehoe loan proceeds. On
September 30, 2010, the day that Kehoe’s line of credit
closed—and the last business day of the third quarter of
2010—Walsh “arrange[d] for Mr. Kehoe to make a
payment” for Abrams. Walsh testified that he later “ma[d]e
another payment with Mr. Kehoe’s money on behalf of
Mr. Abrams” as well. The bank’s 2010 third quarter call
report failed to include Abrams’s loan as past due. If it had
been included, the bank would have had to add over
$197,000 (the full amount of the loan) to its delinquent-loan
balance for that quarter.
42               UNITED STATES V. YATES

   Walsh also used the Kehoe loan proceeds to make loan
payments for Edward Duffy, who was “chronically late” and
a significant source of concern for defendants. On
September 30, 2010, the same day as the payment on behalf
of Abrams and the last business day of the third quarter,
Walsh arranged a payment on behalf of Duffy using money
from Kehoe’s loan.

    Duffy, for his part, testified that he had deliberately
stopped making loan payments to force the bank to
restructure the loan. He never requested or authorized the
payment made on his behalf. Walsh later told Duffy that
Walsh made the payment “to keep the loan current” because
of the “federal examiners.” The bank’s 2010 third quarter
call report failed to include Duffy’s loan as past due. If it
had been included, the bank would have had to add over
$199,974 to its delinquent-loan balance for that quarter.

    Finally, Walsh used money from Kehoe’s $1.7 million
loan to make a loan payment on behalf of Robert Goodman,
a bank customer who was “always late” on his payments
following his divorce. Walsh directed a transfer of $22,784
from Kehoe’s loan proceeds “to get [Goodman] off . . . the
past due report” for 2010. Goodman’s payment was also
made on the last day of the third quarter. Yet, the bank’s
2010 third quarter call report failed to include Goodman’s
loan as past due. If it had been included, the bank would
have had to add over $995,227 to its delinquent-loan balance
for that quarter.

    The jury heard evidence that using funds from a loan to
Kehoe to pay off the loans of other unsuspecting delinquent
customers was not consistent with the FDIC’s call report
requirements. The Kehoe arrangement, the FDIC’s Paul
Worthing explained to the jury, “mask[s] the true
performance issues” in the delinquent loans and “exposes the
                  UNITED STATES V. YATES                    43

bank to even greater levels of risk.” “Essentially, they are
using bank funds . . . to bring past due loans current.” Those
loans, Worthing testified, “should be reported as past due.”

    Defendants’ efforts to reduce the bank’s exposure on the
call reports was not limited to the Kehoe arrangement. At
the end of the quarter, Yates personally cleared the past-due
loan of bank customer and former NBA basketball player
Chris Dudley to keep his delinquent loan off the call report.
Dudley held two personal accounts and a separate political
campaign account at the bank. At one point, Dudley missed
a payment on a personal loan, but neither of his personal
accounts had sufficient funds to cover the $23,326.66 due.

    A bank teller testified that Yates directed her to transfer
the amount owed out of Dudley’s political campaign account
to cover the past-due payment. The teller refused and Yates
walked away upset. A loan specialist testified that Yates
gave her the same direction. The loan specialist did as she
was told, annotating the transaction “per Diana.” Yates did
not report Dudley’s delinquent loan on the next call report,
which would have required adding $975,847.83 to the
delinquent balance. Dudley told the jury that he “absolutely”
did not approve “any transfer from a political campaign”
account to “something personal,” and that the bank later told
him it was just a mistake.

    Finally, with defendants’ knowledge Walsh resolved one
of the bank’s delinquent loans on his own. Chris Guettler’s
loan was one of the “most problem[atic]” on the bank’s
books. Walsh testified that defendants “handed” him the
Guettler loan to “fix,” and that Guettler’s ongoing
delinquency was discussed at ILC meetings. There was
“tremendous pressure” from both Heine and Yates to get
Guettler’s payment in.
44               UNITED STATES V. YATES

    So Walsh decided to make the payment himself, on the
last business day of the fourth quarter of 2011. When he
informed the defendants he had done this, Heine gave Walsh
a “high-five knuckles,” and Yates smiled and joked she was
“not supposed to hear that.” Then the group “all bought
beers and cheered each other and had a couple of drinks and
celebrated the year.”

    Walsh testified that he made the payment for Guettler “to
clean up the reports.” He felt “like it was the right thing to
do for everybody, just to clean the report and make it go
away.” The jury also saw an email exchange in which the
bank’s controller expressed concern about Walsh’s payment.
Yates responded that, “[i]t looks worse than it is,” and Walsh
“should have . . . done [it] in cash.” Yates instructed the
controller to edit the transaction to “[s]omething more
generic.” Yates omitted Guettler’s loan from the bank’s past
due loan balance on the next call report. Adding it would
have required including another $69,704 to the delinquent
loan balance.

    The FDIC’s Worthing also testified about Walsh’s
payment for Guettler. Worthing explained that under FDIC
rules, if a bank employee made payments on behalf of
customers to get loans “off of a report,” as Walsh did for
Guettler, the bank should reverse the transactions and deem
the loans “not current.” As Worthing explained, “the loans
were not brought current in a manner that the borrower is
performing on those loans. So there is additional risk in
those loans and we want those to be reported accordingly on
the call report . . . because they are not performing. A bank
employee using their own money to disguise that
performance is, in my mind, improper.”
                  UNITED STATES V. YATES                    45

                              C

    The third scheme involved defendants’ efforts to reduce
the size of the bank’s OREO portfolio by selling off two
OREO properties, known as “Mesick” and “Bishop.” Both
properties were problems for the bank. Mesick was “really
a mess,” littered with trash, “[t]he back was overgrown,” and
it was infested with rodents. Bishop had a “bunch of illegal
or code infractions.” It was also the “last piece of foreclosed
property” in the bank’s OREO portfolio at the time it was
sold.

    Walsh, Heine, and Yates met with a property developer,
Randall Coleman, who bought and flipped rental properties.
In late March 2010, after the poor 2009 FDIC examination
and just before the MOU, Coleman agreed to buy the Mesick
property, which defendants could then remove from OREO.
But to make the sale happen, defendants again engaged in a
scheme improperly to divert bank funds, route them through
a middleman (here Coleman), have those funds come back
into the bank as if it were new money, and then use the cash
to clear up the undesirable information on the call reports.

    FDIC regulations require that any debt-financed
purchase of an OREO property include a cash down-
payment by the buyer. The purpose of this rule is to mitigate
the bank’s risk by ensuring that the borrower has “skin in the
game.” In fact, the bank’s auditor specifically informed
Yates that Coleman would need to put 20% down for the
properties to be moved out of OREO.

    Defendants initially ignored this requirement and
extended a $375,000 loan to Coleman that would allow him
to completely finance the Mesick purchase, without any
down payment. Yates appreciated the significance of this
arrangement. As she wrote to Walsh in an email: “So they
46               UNITED STATES V. YATES

have no down payment whatsoever? This is not going to be
pretty.” Nevertheless, in an email to Heine and several other
bank employees with a “smiley face” emoticon, Yates wrote:
“Approve to move property out of ORE.” This would
represent to the Board and FDIC that the sale was
conforming.

    Bishop then became the last foreclosed property in the
bank’s OREO portfolio. In July 2010 (soon after signing the
MOU), Yates approved financing for Coleman to purchase
the Bishop property with another bank loan of $325,000.
She again did not require Coleman to make a down payment.
Bishop’s OREO designation was then removed.

    The Board was not aware that either of Coleman’s loans
were made without down payments. Defendants also were
not forthcoming about this with the FDIC. On January 26,
2011, Yates emailed Heine, Walsh, and others with the
subject line: “Mum’s the word for now.” In the email, she
explained her concern that the FDIC examiners would
realize the loans were “not conforming,” but that she was
“not going to mention it” because otherwise the properties
“will all have to go back to OREO.” A few weeks after
that email, defendants sent a letter to the bank’s external
auditor, falsely representing that the bank had “received all
cash down payments” for Mesick and Bishop, which are
“satisfactory for the full-accrual sales treatment of these
transactions.”

    Despite the defendants’ efforts, the FDIC noticed the
deficiency and objected that Coleman had not put enough of
his own money down to allow the bank to remove the two
properties from OREO. Yates wrote a memo to the FDIC
promising to remedy the situation. And defendants then
went back to the drawing board to formulate a new plan to
try to “cure the Colemans.”
                  UNITED STATES V. YATES                      47

    But their new plan once again involved giving Coleman
more of the bank’s money as part of resolving weaknesses
on the bank’s call reports. As Yates wrote in an email to
Heine and others, “We are going to have to figure out a way
to give Mr. Coleman a loan. I am afraid the examiners are
going to pull all of this in September to ensure all is cleared.”
After the bank’s controller sent a series of emails to Yates
asking for updates on the Coleman down payments and
noting that the bank’s books had been out of balance for
months, Yates signed a credit approval presentation for a
$100,000 loan to Coleman.

    The presentation falsely represented that the loan would
be used for “improvements to investment properties.” The
bank’s Chief Credit Officer Kelly Francis testified that, in
fact, the $100,000 “would be to clear up the balance position
on the bank’s books.” Francis testified that she raised
concerns about Coleman’s liquidity on numerous occasions,
but Yates responded, “Just get it done.” Otherwise, Yates
wrote, the bank would have to write off the amount: “It is
either do it or charge off 100K today.” Heine approved the
$100,000 loan: “Amen. Approve.” Once the loan went
through, $90,000 of it was directed back to the bank as
Coleman’s “down payments.” But on the next call report,
Mesick and Bishop were again not disclosed as OREO
properties.

   Around this time, Yates emphasized to the Board the
bank’s “very healthy” net income for 2011, noting that she
and Heine were “very proud of our full 2011 results.”
Defendants received $50,000 performance bonuses in early
2012.
48               UNITED STATES V. YATES

                              D

    All of this would eventually catch up with defendants
when the FDIC undertook a further investigation, this time
with the FBI. Walsh was arrested and pleaded guilty to wire
fraud charges and conspiracy to make a false bank entry. He
agreed to provide information to aid the government’s
investigation of Heine and Yates. Walsh was sentenced to
30 months in prison.

    Once defendants’ schemes came to light, the bank ceased
operating. Its remaining assets were sold, its employees lost
their jobs, and shareholders lost most of their investments.

    The government indicted Heine and Yates for conspiracy
to commit bank fraud, 18 U.S.C. § 1349, and numerous
counts of making false bank entries, 18 U.S.C. § 1005. The
indictment alleged that the purpose of the conspiracy was “to
conceal the true financial condition of the Bank and to create
a better financial picture of the Bank to the Board of
Directors, shareholders (current and prospective), regulators
and the public.” “To achieve this,” the indictment alleged,
defendants “reported false and misleading information about
the performance of loans, concealed information about the
status of foreclosed properties, made unauthorized transfers
of Bank proceeds, and failed to disclose material facts about
loans to Bank insiders to the Board of Directors,
shareholders, and regulators.” Heine and Yates’s principal
defense at trial was that Walsh was to blame and that
defendants did not appreciate what he was doing.

   The jury didn’t buy it. It convicted defendants on one
count of conspiracy to commit bank fraud. It also convicted
them of twelve counts of making false bank entries. The
                   UNITED STATES V. YATES                         49

court today vacates all these convictions. The court’s
reasoning, as I will explain, is based on legal error. 1

                                 II

    The majority’s first move is to vacate defendants’
convictions for conspiracy to commit bank fraud. But to get
there, the majority must ignore the overwhelming evidence
of defendants’ guilt, which the government presented to the
jury through a valid bank fraud theory—so valid, in fact, that
the majority does not even question it. The majority then
finds fault with a single PowerPoint slide that the
government used at closing argument. Between that slide
and the district court not giving a responsive curative
instruction, the majority holds that defendants’ conspiracy
convictions must fall.

    The court’s decision presents nowhere near the basis
required to undo the result of defendants’ month-long trial.
In holding otherwise, the majority wrests from jurors a
decision that was rightfully theirs to make, while failing to
show the proper deference to the district court’s real-time
judgment calls.      In the process, the majority gives
defendants—for now—a free pass for committing serious
misconduct that Congress understandably decided was
detrimental to our nation’s banks.

    1
      Defendants raised a variety of other issues on appeal that the
majority does not reach. I address only the grounds on which the
majority vacates defendants’ convictions. But I note that defendants’
other arguments are insubstantial. I would have rejected them in
affirming defendants’ convictions in full.
50                UNITED STATES V. YATES

                              A

    Although the majority obscures the point, it is important
to understand that defendants’ conspiracy convictions were
based on an entirely sound theory of bank fraud, and one that
the majority opinion does not counter.

    Under 18 U.S.C. § 1349, it is a crime to conspire to
commit bank fraud. The bank fraud statute, in turn, punishes
anyone who “knowingly executes, or attempts to execute, a
scheme or artifice” to “defraud a financial institution.” Id.
§ 1344(1). To qualify as a “scheme to defraud,” “the scheme
must be one to deceive the bank and deprive it of something
of value,” meaning money or property. Shaw v. United
States, 137 S. Ct. 462, 469 (2016); see also Neder v. United
States, 527 U.S. 1, 20–21 (1999) (explaining that “scheme
or artifice to defraud” is interpreted analogously in the wire,
mail, and bank fraud statutes). The deprivation of property
“must play more than some bit part in a scheme: It must be
an ‘object of the fraud.’” Kelly v. United States, 140 S. Ct.
1565, 1573 (2020) (quoting Pasquantino v. United States,
544 U.S. 349, 355 (2005)). The government’s proof easily
met these elements.

    As an initial matter, and quite obviously, the jury could
conclude that defendants engaged in a scheme to deceive the
bank. The majority opinion does not suggest otherwise.
Defendants repeatedly misled the bank’s Board and bank
employees about A Avenue and the loans to Martin Kehoe
and Randall Coleman. Defendants improperly used bank
funds to complete an unlawful straw purchase of A Avenue;
made an unauthorized $675,000 wire transfer to Kehoe;
misled the Board about the purpose of the $1.7 million
Kehoe loan; misleadingly used the Kehoe loan to pay off
delinquent loans of other customers without their
knowledge; took money out of Dudley’s political account
                  UNITED STATES V. YATES                    51

and improperly used it to pay off his personal loan without
telling him; failed to obtain required down payments from
Coleman; and misled the Board about the purpose of
Coleman’s later $100,000 bank loan.

    This was deception upon deception. Each of defendants’
wrongs was independently deceptive and subject to the bank
fraud statute. See, e.g., United States v. Vinson, 852 F.3d
333, 342–43, 344 n.13, 352 (4th Cir. 2017) (upholding bank
fraud conviction when, among other conduct, defendant
conspired with bank president to obtain approval of sales
without conforming down payments, made unauthorized
loans, and concealed the true purpose of loans he obtained);
United States v. Peterson, 823 F.3d 1113, 1118, 1120–21
(7th Cir. 2016) (upholding bank fraud conviction when
defendants falsely claimed that their loans would be used for
business purposes); United States v. Gallant, 537 F.3d 1202,
1211, 1225 (10th Cir. 2008) (upholding bank fraud
conviction when bank officials conspired with others to
“conceal delinquencies” by “making [accounts] appear
current without any payments by the cardholders”);
Feingold v. United States, 49 F.3d 437, 440 (8th Cir. 1995)
(upholding bank fraud conviction when bank president
ensured “that the bank loan committee and its directors did
not know the true purpose of the loan or the nature of the risk
involved”).

    These individual wrongs were bad enough. But as pieces
of a collective effort to deceive the bank and regulators about
the financial health of the institution, they were deceptive
beyond that. This is quite plainly a permissible theory of
deception under the bank fraud statute. See, e.g., United
States v. Molinaro, 11 F.3d 853, 857–58 (9th Cir. 1993)
(upholding conviction under § 1344 when bank owner
concealed facts that would have made regulators “frown”
52                UNITED STATES V. YATES

and that “would excite the Board’s interest and invite closer
scrutiny of [the bank’s] solvency”); United States v.
Severson, 569 F.3d 683, 685–86 (7th Cir. 2009) (upholding
bank fraud conviction when the defendant participated with
bank’s president in scheme to “mask the bank’s dilapidating
condition and to present the illusion of a financially sound
bank”); United States v. Fields, 614 F. App’x 101, 102 (4th
Cir. 2015) (affirming convictions of bank executives when
“[t]he indictment alleged that the objectives of the
conspiracy were to hide the true financial condition of the
Bank and to benefit the conspirators at the Bank’s expense”).

    Defendants also deprived the bank of money or property
as part of this deceptive scheme. See Shaw, 137 S. Ct.
at 469. How? Because they literally took from the bank
millions of dollars and repurposed it. Defendants diverted
from bank funds: $267,727 to Danny Williams to do a straw
purchase of A Avenue; $675,000 for Kehoe’s initial
unauthorized wire transfer; another $1.7 million to Kehoe to
cover up the initial $675,000 outlay and surreptitiously pay
off other people’s loans; $23,326.66 out of Dudley’s
political account; and $100,000 to Coleman to pay back the
down payments defendants falsely represented Coleman had
already made, to say nothing of the initial amounts loaned to
Coleman to finance the Bishop and Mesick purchases and
get them out of OREO. All of this was money defendants
took from bank funds as part of their fraudulent scheme.

    Under Supreme Court precedent, it is irrelevant whether
the bank suffered an “ultimate financial loss” or whether
defendants had an “intent to cause financial loss.” Shaw,
137 S. Ct. at 467. The bank had “the right to use [its] funds.”
Id. at 466. Defendants misappropriated those funds. It is
hard to imagine a clearer deprivation of money or property
than actually diverting millions of dollars from the bank. See
                  UNITED STATES V. YATES                      53

id. at 467 (explaining that it is “‘sufficient’ that the victim
(here, the bank) be ‘deprived of its right to use of the
property, even if it ultimately did not suffer unreimbursed
loss”) (quoting Carpenter v. United States, 484 U.S. 19, 26–
27 (1987)).

    The defendants respond that, in fact, taking money from
the bank was not an “object” of their scheme because it was
merely an “incidental byproduct” of their broader
“objective” of lying to the bank’s Board and government
regulators about the bank’s financial health. The basis for
this argument is the Supreme Court’s “Bridgegate” decision
in Kelly v. United States, 140 S. Ct. 1565 (2020). Quite
fortunately, the majority does not go with defendants on this
point, instead assuming that the government’s “bank-funds
theory” was permissible. But it should be clear that
defendants’ reliance on Kelly is wholly without merit.

    In Kelly, the defendant public officials closed two lanes
of the George Washington Bridge to punish the Fort Lee,
New Jersey mayor for refusing to support the Governor’s
reelection. Id. at 1568–69. To ensure that traffic in the
remaining lane would not be further delayed during the toll
collector’s breaks, the defendants arranged for a second toll
collector to be on duty. Id. at 1570. The government argued
that the added cost of this toll collector constituted a property
deprivation sufficient to sustain a conviction for wire fraud
(which has the same analytical structure as the bank fraud
statute we consider here). Id. at 1572.

   The Supreme Court rejected the government’s theory.
The Court explained that “the Government had to show not
only that [defendants] engaged in deception, but that an
object of their fraud was property.” Id. at 1571 (quotations
and alterations omitted). While “a scheme to usurp a public
employee’s paid time is one to take the government’s
54                UNITED STATES V. YATES

property,” in Kelly the defendants’ “use of Port Authority
employees was incidental to—the mere cost of
implementing—the sought-after regulation of the Bridge’s
toll lanes.” Id. at 1572. This was insufficient to support
defendants’ convictions because the “property must play
more than some bit part in a scheme.” Id. at 1573. A
“property fraud conviction cannot stand,” Kelly held, “when
the loss to the victim is only an incidental byproduct of the
scheme.” Id.

    Properly considered, this case bears no meaningful
resemblance to Kelly. Defendants’ fraudulent diversion of
millions of dollars in bank funds was not somehow a mere
“bit part,” “implementation cost,” or “incidental byproduct”
of their fraudulent scheme. Even if defendants misguidedly
believed that all the bank’s books would eventually balance
out, using bank funds was central to their fraud.

     Kelly was concerned with federal prosecutors misusing
the wire fraud statute to turn “every corrupt act by state or
local officials . . . [into] a federal crime.” Id. at 1574.
Defendants’ misconduct at their bank, in sharp contrast, lies
at the foundation of the bank fraud statute. Defendants took
the bank’s money, diverted it to trusted third parties
(Williams, Kehoe, Coleman), and then used these third
parties to re-route the money back to the bank to wipe away
troublesome bank records that would otherwise attract the
scrutiny of the bank’s Board and regulators. Diverting the
bank’s funds was necessary, central, and critical to the entire
scheme. Under any reasonable sense of the phrase—both
linguistically and conceptually—depriving the bank of this
money was “an object” of defendants’ fraud. Id. at 1571
(emphasis added) (quotations omitted).

   The Second Circuit in United States v. Gatto, 986 F.3d
104 (2d Cir. 2021), rejected the same argument under Kelly
                 UNITED STATES V. YATES                    55

that defendants raise here. In Gatto, the defendants were
employees at a sports apparel company that had sponsorship
agreements with university sports programs. Id. at 111. The
defendants illicitly paid money to basketball recruits’
families to entice the recruits to join these programs, which
would have made the students ineligible under NCAA rules.
Id. Defendants were prosecuted for wire fraud, and the
Second Circuit upheld the convictions on the government’s
theory that defendants had deprived the universities of
money used for financial aid given to the student athletes.
Id. at 116.

    In so holding, the Second Circuit rejected the
defendants’ reliance on Kelly. The Second Circuit explained
that “[d]efendants may have had multiple objectives, but
property need only be ‘an object’ of their scheme, not the
sole or primary goal.” Id. (quoting Kelly, 140 S. Ct. at 1572)
(citation omitted). Depriving the universities of funds was
not merely an “implementation cost[]” or “incidental
byproduct” of defendants’ scheme but was rather “at the
heart” of the scheme, because “the scheme depended on the
Universities awarding ineligible student-athletes athletic-
based aid.” Id. That was so even though depriving the
universities of financial aid monies was part of defendants’
broader scheme to pay recruits’ families to ensure that
recruits went to schools where defendants’ apparel company
had lucrative sponsorship relationships. See id. at 109.

    As in Gatto, diverting money from the bank may not
have been Heine and Yates’s “sole or primary goal.” Id. But
it was “at the center of the plan,” id., because the larger
scheme to conceal the bank’s poor financial standing
integrally depended on using the bank’s own funds for that
purpose. This case involves a scheme broader than simply
depriving the bank of money outright, just as in Gatto the
56               UNITED STATES V. YATES

scheme was broader than just depriving the universities of
money. But that made no difference to the Second Circuit,
and it should make no difference here. Defendants in this
case did not somehow remove millions of dollars from the
bank “incidentally.”

    The central role of the monetary deprivation here in
relation to the fraud is thus fundamentally different from
what occurred in Kelly, where the deprivation of toll
collectors’ wages was merely a bit byproduct of the political
payback scheme. That Heine and Yates taking money from
the bank was part of their broader effort to mislead the bank
and the FDIC should not somehow take their misconduct
outside the bank fraud statute. That would create nothing
less than a license to misuse bank funds.

                              B

    The majority does not disagree with anything I have just
said about the theory of bank fraud set forth above. It is
clear, in my view, that this theory was a legally valid one.
And a massive amount of evidence supported it, too. So
what could provide the basis for reversing defendants’
conspiracy convictions?

     The majority offers only this: during closing argument,
the government used a PowerPoint slide that featured some
misplaced theories of “something of value.” But a few
misstated bullet points in a PowerPoint deck cannot be a
thread that somehow unravels defendants’ entire multi-week
trial. The misplaced PowerPoint slides were clearly
harmless to the overall result. See Skilling v. United States,
561 U.S. 358, 414 & n.46 (2010).

    At closing, the government used a 157-slide PowerPoint
presentation. One slide, entitled “Something of Value,”
                 UNITED STATES V. YATES                    57

stated that defendants “Sought to deprive Bank and [the
Board] of” (1) “Accurate financial information in Bank’s
books and records”; (2) “The defendants’ salaries, bonuses,
and use of Bank’s lending services”; and (3) “Use of Bank
funds.” Later, outside the presence of the jury, Heine
objected that “something of value cannot be the accuracy of
the information that was the subject of the representation,”
and sought a curative instruction. The district court declined
to give one.

    The majority concludes that depriving the bank of
accurate information, a more abstract deprivation, could not
be a deprivation of money or property under the bank fraud
statute. I agree with that. The majority also concludes that
depriving the bank of defendants’ salaries and bonuses was
not the deprivation of property either. I suspect the majority
is not correct when it comes to performance-based
compensation. See United States v. Ratcliff, 488 F.3d 639,
644 (5th Cir. 2007) (“We do not dispute the Government’s
contention that a salary and other financial employment
benefits can constitute ‘money or property’ under the
statute.”). But it is easy enough for me to assume for
purposes of analysis that both these theories on the
government’s PowerPoint slide are impermissible. Even so,
this certainly does not justify reversing defendants’
conspiracy convictions.

    When it came to the actual jury instructions, the jury was
correctly charged using language that directly tracked the
bank fraud statute: “The phrase ‘scheme to defraud a bank’
means any deliberate plan of action or course of conduct by
which someone intends to (a) deceive or cheat (b) a bank out
of something of value.” The instructions did not ascribe any
definition or legal theory to “something of value,” as
58                UNITED STATES V. YATES

defendants concede. Indeed, the district court pointed that
out when denying Heine’s request for a curative instruction.

    Although the majority purports to rely on the fact that the
jury instructions did not further define “something of value,”
defendants do not assert they requested any jury instruction
on “something of value.” In fact, they do not challenge on
appeal any of the jury instructions that the district court gave.
The jury was also correctly instructed that “arguments by the
lawyers are not evidence.” To say that the jury during the
trial was given three different theories of “something of
value,” as the majority does, is thus not correct. At best, the
jury was given three different theories on a single closing
argument PowerPoint slide.

    The majority acknowledges, of course, that one of these
three theories of “something of value” was the defendants’
“Use of Bank funds”—the perfectly legitimate theory I
detailed above. But the majority somehow claims that the
government “said little more about that theory at trial.” That
assertion blinks reality.       The entire focus of the
government’s case during defendants’ lengthy trial was to
show—through witness after witness and document after
document—how defendants diverted money from the bank,
“cleaned” it through valued third parties like Kehoe, and
then arranged for the money to come back into the bank
where it was re-deployed to problem areas in the bank’s
portfolio that were likely to invite inquiry. Again, there is
no challenge to the jury instructions here. And the
government was not required to argue to the jury through
special terminology—as opposed to demonstrate with
evidentiary proof—that defendants had as an object the
diversion of bank funds.

    The majority is thus simply wrong in claiming that from
the perspective of whether the defendants deprived the bank
                 UNITED STATES V. YATES                    59

of something of value, the “accurate-information” and
“salary-maintenance” theories “were the focus of the entire
prosecution.” That defendants lied to the bank, and that they
did so to preserve their own financial well-being, were
certainly themes in the government’s case. But these were
part of the government’s entirely lawful theory of deception.

    Critically, there is no serious challenge to the
admissibility of any evidence here. And the evidence
relating to defendants misleading the bank and regulators
about the financial health of the bank, as well as defendants’
salaries and bonuses, was independently relevant to other
aspects of the government’s proof and its overall theories of
fraud and motive. Defendants do not challenge the
admissibility of this evidence, nor could they. The majority
is thus clearly mistaken in claiming that “the entire district
court proceedings were permeated with . . . prohibited . . .
theories.” (quotations and brackets omitted). The district
court proceedings were permeated with admissible
evidence—all of which was damning for the defendants on
the various elements the government was required to prove.

     The issue thus comes back to whether the government’s
use of a partially inaccurate “Something of Value” closing
argument slide warrants reversal. It clearly does not. “Even
when a contemporaneous objection is made, improprieties in
counsel’s arguments to the jury do not constitute reversible
error unless they are so gross as probably to prejudice the
defendant, and the prejudice has not been neutralized by the
trial judge.” United States v. Mendoza, 244 F.3d 1037,
1044–45 (9th Cir. 2001) (quotations omitted); see also
United States v. Barragan, 871 F.3d 689, 708 n.20 (9th Cir.
2017).

    Some of the factors we consider in making that
determination are the strength of the prosecution’s case
60               UNITED STATES V. YATES

notwithstanding the error, Barragan, 871 F.3d at 708, the
emphasis placed on the error in the “context of the entire
trial,” United States v. Senchenko, 133 F.3d 1153, 1156 (9th
Cir. 1998), and whether the jury was properly instructed,
United States v. Medina Casteneda, 511 F.3d 1246, 1250
(9th Cir. 2008). We have also held that “[w]hen counsel
misstates the law, the misstatement is harmless error if the
court properly instructs the jury on that point of law or
instructs that the attorneys’ statements and arguments are not
evidence.” Mendoza, 244 F.3d at 1045 (quoting Lingar v.
Bowersox, 176 F.3d 453, 460 (8th Cir. 1999)).

     All these factors support the government. The closing
argument slides were the only time the parties identify the
jury hearing anything about the meaning of “something of
value.” While the district court declined to give a curative
instruction after closing argument, this is a real-time
decision for which we give the district court “substantial
latitude.” United States v. Rodriguez, 971 F.3d 1005, 1016
(9th Cir. 2020); see also United States v. Reyes, 660 F.3d
454, 461 (9th Cir. 2011). When the jury instructions were
themselves legally correct, and when the trial judge had
already instructed the jury that counsel’s arguments were not
evidence, I certainly cannot fault the district court decision
on Heine’s request for a curative instruction. See Mendoza,
244 F.3d at 1045.

    At the very least, reversal of the convictions would not
be warranted given the overwhelming evidence of guilt,
including the extensive testimony showing that defendants
deprived the bank of something of value—millions of dollars
in diverted bank funds.         We should have affirmed
defendants’ convictions for conspiracy to commit bank
fraud. In assuming the position of both juror and district
court judge, the majority forgets our role and undermines
                  UNITED STATES V. YATES                      61

Congress’s objective to punish blatant white-collar
misconduct of the type we have here, which threatens the
stability of our banking system.

                               III

    Equally mistaken is the majority’s decision to vacate
defendants’ convictions for making false bank entries. See
18 U.S.C. § 1005. The jury convicted defendants on twelve
counts of making false bank entries: three for the A Avenue
transaction (counts 12, 18–19); four for the Coleman
transactions (counts 3, 11, 16–17); and five for the third-
party loan payments on behalf of Abrams, Duffy, Goodman,
Dudley, and Guettler (counts 7–9, 13, 15).

    Defendants did not clearly challenge on appeal their false
bank entry convictions as to the A Avenue and Coleman
transactions. The government pointed that out in its
answering brief, and defendants did not even address it in
their reply brief. So the government will understandably be
surprised to learn that the majority has vacated all of the false
bank entry convictions because of their connection to the
now-invalid conspiracy charge, based on what appears to be
a single line of argument in defendants’ opening brief—a
line that does not even appear in the argument section
devoted to the false bank entry convictions.

    Because I believe we should have affirmed defendants’
conspiracy convictions outright, premising the false bank
entry charges on the conspiracy convictions poses no issue
for me. But the majority, which must confront the question,
concludes it is unclear whether the jury would have
convicted the defendants for making false bank entries in the
absence of a conspiracy. I highly doubt that conclusion is
correct, even on the terms of the majority opinion. The
majority itself acknowledges that “Heine and Yates were
62                UNITED STATES V. YATES

personally involved in making the reports charged as false
entries.” Even if the conspiracy convictions fail, the
majority has not shown why this alone requires vacatur of
the false bank entry convictions.

    But at the very least, given the almost total lack of
briefing on this question, the majority would have done well
to at least ask the parties to weigh in further on this issue
before vacating convictions that the government understood
defendants not to even be appealing. Or we could have left
this issue to the district court on remand. Instead, in one fell
swoop, all of defendants’ convictions get tossed, including
ones that I am not even sure defendants properly appealed.

    But the majority goes further. The false bank entry
convictions that defendants did clearly appeal (counts 7–9,
13, 15) arise from defendants’ failure to include as past-due
loans on the FDIC call reports those delinquent loans that
defendants paid out of third-party funds, namely, the
$1.7 million loan to Kehoe (counts 7–9), Dudley’s political
account (count 13), and Walsh’s payment on behalf of
Guettler (count 15). As to counts 7–9 and 15, the majority
also holds that insufficient evidence supported these
convictions, even under plain error review (for count 15).
This aspect of the majority’s holding now bars retrial on
counts 7–9 and 15. Once again, the majority’s setting aside
of the jury’s verdict is deeply troubling and lacks a proper
basis in law.

    The false bank entry statute criminalizes making “any
false entry in any book, report, or statement of [a federally-
insured] bank, . . . with intent to injure or defraud” the bank
or the FDIC. 18 U.S.C. § 1005. Under this statute, a
statement on a banking entry is “false” if it is “intentionally
made to represent what is not true or does not exist, with the
intent either to deceive its officers or to defraud the
                   UNITED STATES V. YATES                       63

association.” United States v. Darby, 289 U.S. 224, 226
(1933) (quotation omitted). The purpose of this statute is “to
give assurance that upon an inspection of a bank, public
officers and others would discover in its books of account a
picture of its true condition.” Id.

    Consistent with that purpose, falsity may take many
forms. An entry is false if it records a transaction that is itself
“false and fictitious, concocted for the very purpose of
distorting [a] financial statement.” United States v. Gleason,
616 F.2d 2, 29 (2d Cir. 1979). “[M]aterial omissions” are
also false statements. United States v. Ely, 142 F.3d 1113,
1119 (9th Cir. 1997) (noting that “[e]very circuit” agrees).
Statements “capable of misleading the officers of the bank”
can be false as well. United States v. Sheehy, 541 F.2d 123,
129 (1st Cir. 1976). And so too statements and omissions
that are intended to conceal the “true picture of the bank’s
condition.” United States v. Luke, 701 F.2d 1104, 1108 n.7
(4th Cir. 1983); see also United States v. Austin, 585 F.2d
1271, 1274 (5th Cir. 1978) (a bank entry was false when it
“prevented the FDIC examiners from discerning” an
overdrawn account).

    In this case, to avoid further internal and regulatory
scrutiny, defendants sought to reduce the amount of past-due
loans on their FDIC call reports. But there were some bank
customers that were delinquent. Defendants’ primary
solution was to loan $1.7 million to the hard money lender
Kehoe, not disclose to the bank’s Board the purpose of the
Kehoe loan, and then use the Kehoe loan proceeds to pay off
the delinquent accounts of other customers without their
knowledge. Defendants would arrange for these payments
at the very end of the fiscal quarter, just before call reports
were due.
64                UNITED STATES V. YATES

    “When reviewing the sufficiency of the evidence, we ask
whether, after viewing the evidence in the light most
favorable to the prosecution, any rational trier of fact could
have found the essential elements of the crime beyond a
reasonable doubt.” United States v. Koziol, 993 F.3d 1160,
1176 (9th Cir. 2021) (emphasis added) (quotations omitted).
In the majority’s view, there was no “falsity” here as a
matter of law because the call reports simply asked whether
the loans had been paid, and here they were. The majority’s
cramped approach to the false bank entry statute is wrong.
And its refusal to accept the jury’s verdict shows insufficient
regard for the factfinders who heard the evidence.

    The FDIC call reports required loans to be included if
they were “past due.” The question put before the jury was
what this meant. In evidence the majority nowhere
acknowledges, the jury heard extensive testimony that the
bank, defendants, and the FDIC all understood that a “past
due” loan was a loan for which “the borrowers are not
paying timely or not paying.” Indeed, the government’s
evidence showed that the Bank of Oswego’s own loan
committee had a “past due list” that identified the account
number, the name of the borrower, the monthly payment,
and the number of days the borrower’s payment was past
due.

    Not only did the jury hear about a common
understanding of “past due,” it learned why it mattered to the
FDIC that a “past due” loan was one for which the borrower
had not paid. The reason: delinquent loans present a
significant functional risk for the bank, which is why the
FDIC requires them to be reported. The FDIC’s Paul
Worthing explained to the jury that defendants’ rerouting of
the Kehoe loan proceeds “mask[s] the true performance
issues” in the delinquent loans and exposes the bank to even
                  UNITED STATES V. YATES                    65

greater levels of risk. “Essentially,” Worthing testified,
defendants were “using bank funds . . . to bring past due
loans current.” The FDIC through the call reports is
attempting to assess how good a job the bank is doing when
it loans money. If a bank is effectively using its own money
to repay delinquent loans, the bank is conveying the
misimpression that its loan practices are better than they
actually are.

    Based on the evidence presented at trial, it is not correct
to say, as the majority does, that no rational jury could find
defendants guilty of making false bank entries. To the
contrary, the jury could have easily concluded that
defendants’ failure to include loans for which they had
manufactured payments was either “misleading,” Sheehy,
541 F.2d at 129, or omitted “vital fact[s],” Ely, 142 F.3d at
1119, or was intended to conceal the “true picture of the
bank’s condition,” Luke, 701 F.2d at 1108 n.7, or was
concocted for the “very purpose of distorting [a] financial
statement,” Gleason, 616 F.2d at 29. Or all the above. All
of these would satisfy the “falsity” standard under § 1005.

    The majority therefore errs in believing it relevant that
the FDIC’s call report form “does not call for a narrative
response” or “ask for the source of a payment on any of the
underlying loans.” The point here is not that defendants
were required to make some additional notation in a template
that did not allow for it, but that defendants categorically
treated as not “past due” loans that were “past due.” Or at
least the jury could so conclude based on the evidence
presented.

    But of course, the jury had much more to go on than just
the shared meaning of “past due.” The majority asserts that
“the loan to Kehoe was a real loan that was approved by the
board of directors.” That assertion is difficult to comprehend
66                UNITED STATES V. YATES

because it ignores the plainly fraudulent features of the
Kehoe loan. The jury heard evidence that Heine and Yates
failed to disclose that the loan to Kehoe would be used to
pay off the loans of other unsuspecting delinquent customers
(much less Kehoe’s own unauthorized wire transfer of
$675,000).

     In United States v. Ely, 142 F.3d 1113 (9th Cir. 1997),
bank executives similarly arranged for the bank to issue new
loans under the false pretense of “enabl[ing] expansion of
business enterprises,” when, in fact, “the real reason” for the
new loans was to pay off the interest payments on existing
loans. Id. at 1118–19. The only difference between this case
and Ely is that there, the executives were funding personal
stock purchases. Id. at 1116. Here, defendants were using
the loan to hide their own mismanagement. The difference
is irrelevant. The Board may have “approved” Kehoe’s loan,
but the jury could conclude that it did so under false
assumptions. And while the majority proclaims that
Kehoe’s loan was used to return “real money” back to the
bank, this was really just the bank’s money that had been
given to Kehoe after Heine and Yates defrauded their own
Board as to the purpose of his $1.7 million loan.

    There were, in addition, various other irregular features
of the third-party loan payments that the jury could conclude
raised obvious questions about their legitimacy, and thus
whether the loans should have been included as “past due.”
This included that the delinquent account holders were not
even told the payments were made on their behalf. The
majority asserts that “the customers had no right to refuse to
make timely payments on valid loans,” apparently implying
that these customers were required to accept Kehoe’s
payments on their behalf (even though the bank never told
them about the payments). But nothing would require a bank
                  UNITED STATES V. YATES                      67

customer to accept a favor from a hard money lender, with
whatever adverse consequences might follow from that.
From the perspective of Duffy, Goodman, and Abrams, their
loans were very much “past due.”

    But there is more. All of the third-party loan payments
were arranged at the end of the quarter and just before call
reports were due. And in the case of Walsh paying
Guettler’s overdue balance himself, there is extensive
evidence showing that defendants knew Walsh’s conduct
was improper. Why else would Yates have told Walsh she
was “not supposed to hear” about this? And why else would
Yates have instructed the bank’s controller to edit the
transaction to “[s]omething more generic”? The jury could
consider these highly suspicious circumstances in
determining whether defendants made false bank entries.

    The majority itself recognizes that Yates taking money
out of Dudley’s political account was unlawful under the
false bank entry statute. But it is impossible to understand
why the majority draws the line there and refuses to allow
the jury to credit the government’s evidence as to the Kehoe
transactions and Walsh’s personal payment on behalf of
Guettler. The majority finds significant that “once Dudley
found out about it, he could have demanded that [the
payment from his political account] be reversed.” But
couldn’t Abrams, Duffy, and Goodman have demanded that
the Kehoe payments—that they never authorized—be
reversed as well? The same is true for Guettler. At the very
least, the Dudley maneuver is just further evidence of
defendants’ wrongful intent to rig the call reports. It is itself
supportive of the jury’s verdict on the other false entry
counts.

   Under the majority opinion, however, defendants’ only
unlawful conduct in all of this was taking money from
68               UNITED STATES V. YATES

Dudley’s political account. If only Kehoe had also covered
that loan or defendants had paid it themselves, everything
would have been fine. So long as the payment is made, the
loan is technically not past due, and there is no false bank
entry—as a matter of law. The majority opinion is
effectively allowing banks to set up their own Ponzi
schemes. The FDIC can be forgiven for asking how it is
supposed to evaluate the soundness of a bank’s overall loan
practices when bank executives are now given wide latitude
to engage in such misleading financial maneuvering.

     The highly dubious nature of defendants’ conduct thus
takes this case far outside the majority’s hypothetical of a
grandmother paying her grandchild’s loan. Suffice it to say,
hard money lender Martin Kehoe was nobody’s
grandmother. When a grandmother pays a loan, the FDIC’s
concern about a bank’s functional risk is not present because
the loan payment is being satisfied independent of the bank.
Here, defendants were effectively having the bank pay back
its own loans through Kehoe after lying to the Board about
the purpose of the Kehoe loan, which itself exposed the bank
to greater risk. See Darby, 289 U.S. at 226.

    Perhaps defendants could have argued to the jury that
what they did was no different than the beneficent
grandmother. But the jury was certainly not required to
accept that sanitized view of the facts. And the issue is,
unfortunately, not a fact-bound one limited to the particulars
of this case. Under today’s decision, banks can misrepresent
their past due loans on FDIC reports so long as they take
money from the bank, route it outside the bank, and then
have a loan payment made on behalf of an unsuspecting
delinquent customer. And they may do so even if they have
not been forthcoming to their boards about what they are
doing.
                 UNITED STATES V. YATES                 69

                         *   *   *

   I would have affirmed defendants’ convictions in full.
Whatever the line between poor judgment and criminal
behavior, the defendants here clearly crossed it. And armed
with a citation of the court’s opinion, I am concerned that
many more will do the same.

   I respectfully dissent.