Bank fraud law reaches scheme to cheat bank depositor of account funds, Supreme Court says
A person may be guilty of bank fraud under federal law even though he intended to cheat a bank depositor rather than the bank, the U.S. Supreme Court ruled in a unanimous opinion on Monday.
Justice Stephen G. Breyer wrote the court’s decision (PDF) in the case of Lawrence Shaw. Though the Supreme Court rejected Shaw’s arguments on the requirements of the bank fraud law, it returned the case to the San Francisco-based 9th U.S. Circuit Court of Appeals to consider issues regarding the jury instructions.
Shaw had obtained bank account information of a wealthy foreign businessman and used it to transfer funds from the businessman to accounts Shaw controlled. He was convicted under a federal law that makes it a crime to knowingly carry out a scheme to defraud a financial institution or to obtain money or other property owned or controlled by a financial institution by means of false or fraudulent pretenses.
Shaw had argued he wasn’t guilty under the law. His scheme was intended to deceive the bank and obtain depositor accounts, but he didn’t intend to cheat the bank of its property. The basic flaw in that argument, Breyer said, was that the bank also had property rights in the businessman’s account because it could use the funds as a source of loans to help earn profits.
Breyer also said the law does not require proof of a financial loss to the bank. Nor is there a need for Shaw to know that the bank had a property interest in the businessman’s account, Breyer said.
“To require more, i.e., to require actual knowledge of those bank-related property-law niceties, would free (or convict) equally culpable defendants depending upon their property-law expertise—an arbitrary result,” Breyer wrote.
“Hence, for purposes of the bank fraud statute,” Breyer wrote, “a scheme fraudulently to obtain funds from a bank depositor’s account normally is also a scheme fraudulently to obtain property from a ‘financial institution,’ at least where, as here, the defendant knew that the bank held the deposits, the funds obtained came from the deposit account, and the defendant misled the bank in order to obtain those funds.”
The case is Shaw v. United States.
Related articles:
ABAJournal.com: “Does bank fraud law require proof of intent to cheat the bank? SCOTUS to decide”
ABA Journal.com: “Kardashian hypothetical is raised in SCOTUS arguments on intent needed for bank fraud violation”
