Does Any Scam Involving Non-cash Money Constitute Bank Fraud?

Unintentional Federal Bank Fraud

The U.S. Supreme Court has just agreed to hear an appeal by a Utah man. This man was convicted on federal charges of aggravated identity theft, possession of stolen mail and bank fraud. His convictions have already been upheld by the 10th Circuit Court of Appeals. However, the federal circuit courts are in disagreement about a very important issue.

Can someone be convicted of bank fraud when they never intended to defraud a bank? Is this the case even if the bank stood no risk of being harmed?

Six federal circuits say no, including the 2nd, which includes parts of Texas. The 10th and two other circuits, however, have ruled that a conviction under the federal bank fraud statute, 18 U.S.C. § 1344(2), does not require any intent to defraud a bank or, some hold, any risk to the bank at all.

In this case, the Utah man and a female cohort were both convicted of identity theft, stolen mail, and bank fraud in regard to a scheme in which, according to the courts, they stole checks from people’s outgoing mail. They then crossed out the names in the “to” fields and replaced them with “Target.” They succeeded in passing six of these checks at a Target store, buying food and goods worth $1,184.58. The defendant then returned some of the merchandise for cash.

Even the prosecution’s own witness, a bank loss-prevention specialist, testified that Target — not the bank — was liable for these fraudulent checks. Unfortunately, previous 10th Circuit rulings had made clear that neither intent to defraud a bank nor actually losses by a bank was required for a valid conviction.

Sentencing

A jury convicted the man and he was sentenced to three years in federal prison.

His own appeal to the 10th Circuit was unsuccessful. “We recognize that our interpretation … may cast a wide net for bank fraud liability,” the appeals court wrote, “but it is dictated by the plain language of the statute and our prior precedent.” Absent a U.S. Supreme Court case overruling its previous decisions, the 10th Circuit is bound by its previous rulings.

The man will now have a chance for vindication. However, his identity theft and stolen mail convictions will stand in any case. The Supreme Court has agreed to hear arguments on whether defendants can commit federal bank fraud without meaning to, and without even risking harm to any bank.

Source: Courthouse News Service, “High Court to Clarify Bank Fraud Convictions,” Annie Youderian, Dec. 13, 2013