8.125 Bank Fraud—Scheme To Defraud Bank

8.125 BANK FRAUD—SCHEME TO DEFRAUD BANK
(18 U.S.C. § 1344(1))

The defendant is charged in [Count _______ of] the indictment with bank fraud in violation of Section 1344(1) of Title 18 of the United States Code. For the defendant to be found guilty of that charge, the government must prove each of the following beyond a reasonable doubt:

First, the defendant knowingly executed or attempted to execute a scheme to defraud a financial institution as to something of value;

Second, the defendant did so with the intent to defraud the financial institution; and

Third, the financial institution was insured by the Federal Deposit Insurance Corporation.

The phrase "scheme to defraud" means any deliberate plan of action or course of conduct by which someone intends to deceive or cheat a financial institution and deprive it of something of value. It is not necessary for the government to prove that a financial institution was the only or sole victim of the scheme to defraud. It is also not necessary for the government to prove that the defendant was actually successful in defrauding any financial institution. Finally, it is not necessary for the government to prove that any financial institution lost any money or property as a result of the scheme to defraud.

An intent to defraud is an intent to deceive or cheat.

Comment

When the scheme or artifice to defraud is a scheme or artifice to deprive another of the intangible right to honest services under 18 U.S.C. §　1346, use Instruction 8.126 (Bank Fraud—Scheme to Deprive Bank of Intangible Right of Honest Services).

A "scheme to defraud" under 18 U.S.C. § 1344(1) "must be one to [both] deceive the bank and deprive it of something of value." Shaw v. United States, 137 S. Ct. 462, 469 (2016).

In Shaw, the defendant created a scheme to siphon off funds from a bank depositor’s account through the use of PayPal, an online payment and money transfer service. The defendant argued that because the losses were eventually borne by the depositor and PayPal, and not the bank, he had not defrauded a "financial institution" within the meaning of § 1344(1). The Supreme Court rejected this argument, holding that for purposes of the bank fraud statute, 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.  Id. at 466. The Court also clarified that in a prosecution under § 1344(1), the government is not required to prove that the bank ultimately suffered a financial loss, that the defendant intended the bank to suffer a financial loss, or that the defendant was aware the bank had a property interest in its customer accounts. Id. at 467; see also United States v. Shaw, 885 F.3d 1217, 1219 (9th Cir. 2018) ("As the Supreme Court has now clarified, an intent to obtain money from a depositor’s bank account is sufficient to constitute bank fraud under 18 U.S.C. § 1344(1). It is not necessary to show an intent to cause the bank itself a financial loss.").　

In United States v. Yates, 16 F.4th 256 (9th Cir. 2021), the Ninth Circuit vacated and remanded a conviction of two bank executives for bank fraud.  The court rejected the government’s theories that the deprivation of “accurate information” or the officers’ salaries and bonuses could constitute the requisite deprivation of “something of value.”  Id. at 264‑66.  The court explained that “property deprivation ‘must play 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.’ ”  Id. at 264, quoting Kelly v. United States, 140 S. Ct. 1565, 1573-74 (2020).  The court, however, agreed with the government’s third theory of deprivation of something of value.  “[W]e 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.’ ”  Id. at 268, quoting Shaw (alterations in original).  “In addition, a bank’s right to its funds extends to the right to decide how to use those funds.  So the fraudulent diversion of a bank’s funds for unauthorized purposes certainly could be the basis for a conviction under section 1344.”  Id.

Approved 12/2021