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High Court to Decide If Intent Required in Bank Fraud Convictions

Dec 20, 2013 | Fraud |

The U.S. Supreme Court recently agreed to resolve a split among the federal appellate circuits about whether a defendant can be convicted of bank fraud even when he never intended to defraud a bank and no bank stood any chance of being harmed. Should any financial scam be considered federal bank fraud if the money would be processed through a bank?

It may surprise you to learn that three federal appellate courts say yes. Six others, however, have ruled that a conviction for bank fraud should, at the very least, either be aimed at a financial institution or threaten some tangible harm. The 11th Circuit, which includes Florida, hasn’t ruled on the question, according to the defendant’s Supreme Court petition.

According to court filings in the case, a Utah man and a friend stole outgoing checks from people’s mailboxes. They then presented six checks, crudely altered, to a local Target store in payment for their own food and merchandise purchases. In some cases, the man returned merchandise for cash refunds. In addition to six counts of bank fraud, he was convicted in 2011 of two counts of aggravated identity theft and one count of possessing stolen mail. He was sentenced to three years in federal prison.

Even the prosecution’s own witness admitted that Target, not the banks, was liable for any losses from the bad checks. The defendant insists he never even thought to defraud a bank, and the parties agree that no bank was at any financial risk. Without either intent or harm, how could $ 1,184.58 in bad checks result in a federal bank fraud conviction?

The 10th Circuit, which includes Utah, upheld his conviction. Based on the statutory language of the federal bank fraud law, 18 U.S.C. §1344, the 10th Circuit had ruled in prior cases that intent was not an element of the crime.

“We recognize that our interpretation … may cast a wide net for bank fraud liability, but it is dictated by the plain language of the statute and our prior precedent,” the court wrote. Absent intervention by the Supreme Court, it said, its hands were tied.

The case is scheduled for argument in March, and the defendant will likely be released from prison before the Supreme Court issues its ruling. Potential bank fraud defendants in the 11th Circuit, however, could well benefit from a favorable ruling.

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