Federal Bank Fraud Ruling Discussed by Federal Criminal Defense Attorney

The U.S. Supreme Court, in Loughrin v. U.S., 573 U.S. __ (2014) held that specific intent to defraud a financial institution is not a prerequisite to a conviction under 18 U.S.C. Section 1344.

The Federal Bank Fraud Statute was the subject of a recent Supreme Court case in Loughrin v. U.S., 573 U.S. __ (2014). In a unanimous decision, the Court clarified the meaning of the statute’s application to bank fraud using checks.

Federal Criminal Defense Attorney Hope C. Lefeber explains that this case represents an expansion of the federal criminal bank fraud statute to include all cases wherein a fraudulent bank transaction takes place even where there is no intent to defraud a financial institution.

While pretending to be a Mormon missionary, Mr. Loughrin rooted through people’s mailboxes to find checks.

Once he found checks, he changed their details, altered the payee and used them to purchase goods at Target.

Afterwards, he returned the goods for cash. Loughrin v. U.S., 573 U.S. __ (2014). He was convicted of bank fraud under 18 U.S.C. § 1344(2).

The full text of the statute reads: “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 … 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.”

Loughrin appealed, contending that section 1344(2) requires intent to defraud a financial institution.

Since he allegedly intended to only defraud Target, he argued that he shouldn’t be convicted of defrauding a bank.

The Supreme Court, in Loughrin, dealt with this argument pretty simply: Section 1344(1) requires an intent to defraud a bank; Section 1344(2) requires an intent to obtain money from a bank by fraud. Because an “or” separates the two sections, the first section’s requirement of intent should not be read into the second section.

Therefore, since Loughrin was convicted under Section 1344(2), the government did not need to prove that he specifically intended to defraud a bank.

Ms. Lefeber explains that the second part of the Court’s decision was trickier.

By not requiring an intent to defraud a bank, Loughrin claimed that the Supreme Court effectively federalized every fraud involving a check.

The Court countered with an example of someone purchasing a counterfeit product using a valid check.

There, the fraud—the sale of a counterfeit product—would not be the “means of” obtaining money from the bank and would therefore fall outside the scope of Section 1344(2); such frauds would remain matters of state law.

According to Ms. Lefeber, this case expands the reach of federal law by not requiring specific intent to defraud a financial institution for a conviction under the bank fraud statute to basically every transaction that involves the use of a check that was altered and/or deposited fraudulently.

Hope Lefeber is a federal criminal defense attorney in New York City.

She has over 30 years experience she is recognized by Superlawyers and is ranked by the National Trial Lawyers as one of the Top 100 Criminal Defense Lawyers in the United States.

Ms. Lefeber’s key areas of practice include defense in business and corporate fraud, mail and wire fraud, money laundering, tax fraud and other white collar crimes, conspiracy and drug offenses.

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