Resolving a split between Federal Circuits regarding the applicability of the federal bank fraud statute, 18 U.S.C. § 1344(2), the United States Supreme Court in Loughrin v. United States has added significant teeth to the statute by ruling that the Government need not prove that a defendant had actual intent to defraud a financial institution in order to secure a conviction thereunder.
Section 1344 of the United States Code provides as follows:
Whoever knowingly executes, or attempts to execute, a scheme or artifice -
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution, by means of false or fraudulent pretenses, representations, or promises;
Shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
The Defendant in Loughrin was convicted of bank fraud under § 1344(2) after forging stolen checks to purchase goods at Target retail stores, only to return such purchases for cash refunds. The Defendant did not dispute that § 1344(2) required the Government to prove (1) intent to obtain bank property, (2) “by means of false or fraudulent pretenses, representations, or promises.” However, the Defendant asserted that he only intended to defraud Target and further argued that the Government was required to prove that he had a specific intent to defraud a bank in order to secure a conviction under § 1344(2). Rejecting the Defendant’s position, the Court held that:
(1) While an intent to defraud a financial institution constitutes a requirement under the first clause of § 1344, such a requirement is not contained in the second clause of the statute, which is separated from the first clause by a disjunctive “or” and, thus, sets forth an independent basis for conviction. The Court further noted that interpreting the second clause to include the element of specific intent to defraud a bank would subsume it into the first clause, thus rendering the second clause superfluous in violation of the well-established rule of statutory construction that “courts ‘must give effect, if possible, to every clause and word of a statute.’ ”
(2) The Court’s interpretation of § 1344(2) did not violate principles of federalism by subsuming traditional state jurisdiction over all “garden-variety cons” involving payment by check rather than cash. Rather, the Court noted that the “by means of” language of §1344(2) requires that false or fraudulent conduct “have some real connection to a federal bank” and constitute the actual mechanism inducing a bank to part with its funds or assets. Thus, the Court held that “garden-variety cons” involving merely a fraud upon a consumer, who in turn pays the con artist with a valid check, would fall outside § 1344(2) because the fraud would not directly cause the bank to part with funds or property. However, false representations made via a forged or altered check submitted by a con artist to a merchant do fall within § 1344(2) because the fraudulent instrument itself would naturally induce a bank to part with funds.
Despite the Court’s attempt to distinguish between the types of fraudulent acts falling within the scope of § 1344(2), the Court nevertheless acknowledged in a footnote that the determination of whether a fraudulent act has a real connection to a bank so as to induce the bank to part with property constitutes a facts and circumstances test which “will depend almost entirely on context.”