Loughrin v. United States
189 L. Ed. 2d 411, 134 S.Ct. 2384, 2014 U.S. LEXIS 4306 (2014)
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Rule of Law:
The federal bank fraud statute, 18 U.S.C. § 1344(2), which criminalizes schemes to obtain bank property 'by means of false or fraudulent pretenses,' does not require the government to prove that a defendant intended to defraud a financial institution. The statute is satisfied by a scheme to obtain bank property through a misrepresentation, even if the misrepresentation is made to a third party rather than the bank itself.
Facts:
- Kevin Loughrin stole checks from residential mailboxes in Salt Lake City.
- He altered the stolen checks by washing off the original writing or crossing out the payee's name and adding a new one.
- Over several months, Loughrin made six of these fraudulent checks payable to the retailer Target.
- Loughrin went to Target stores and, posing as the legitimate accountholder, used the altered checks to purchase merchandise.
- Immediately after the transaction, Loughrin would re-enter the store and return the merchandise for cash.
- The checks Loughrin used were drawn on accounts at federally insured banks, such as Bank of America and Wells Fargo.
Procedural Posture:
- The United States charged Kevin Loughrin in the U.S. District Court for the District of Utah with six counts of bank fraud.
- At trial, the court declined to give Loughrin's proposed jury instruction that a conviction under § 1344(2) required proof of 'intent to defraud a financial institution.'
- A jury convicted Loughrin on all six counts.
- Loughrin, as appellant, appealed to the U.S. Court of Appeals for the Tenth Circuit, arguing the jury instruction was erroneous, with the United States as appellee.
- The Tenth Circuit affirmed the conviction, holding that § 1344(2) does not require intent to defraud a bank.
- The U.S. Supreme Court granted Loughrin's petition for a writ of certiorari to resolve a circuit split on the issue.
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Issue:
Does a conviction under the federal bank fraud statute, 18 U.S.C. § 1344(2), require the government to prove that the defendant intended to defraud a financial institution?
Opinions:
Majority - Justice Kagan
No, a conviction under 18 U.S.C. § 1344(2) does not require the government to prove that the defendant intended to defraud a financial institution. The plain text of § 1344(2) requires only an intent to obtain bank property and that this be done 'by means of' a false representation. Unlike § 1344(1), this clause contains no language requiring an intent to defraud a bank. Reading such a requirement into § 1344(2) would violate the canon against superfluity by making it a mere subset of § 1344(1), especially since the two clauses are joined by the disjunctive 'or.' While this interpretation could raise federalism concerns by federalizing minor frauds, the statute's 'by means of' language provides a crucial limitation; it requires that the false statement be the mechanism naturally inducing the bank to part with its money, such as a forged check that is passed to a merchant who will then present it to a bank.
Concurring - Justice Scalia
No, intent to defraud a bank is not an element of § 1344(2). While I agree with the Court's ultimate conclusion, I am skeptical of the majority's newly crafted test limiting the statute's scope based on the 'by means of' language, which suggests a fraudulent statement must be the 'mechanism naturally inducing a bank' to pay. This interpretation is not clearly supported by the text and its boundaries are unclear. For instance, a fraudster who tricks a victim into writing a valid check for a counterfeit product could be said to have obtained bank property 'by means of' the lie. The Court should have simply rejected the petitioner's flawed arguments without creating this new, potentially problematic limiting principle.
Concurring - Justice Alito
No, intent to defraud a bank is not required under § 1344(2). I write separately to note my disagreement with the majority's dicta suggesting that the statute requires a defendant to have the 'purpose' or 'intent' to obtain bank property. The statute's text explicitly sets the required mens rea as 'knowingly' executing a scheme. This confuses the objective of the scheme (to obtain bank property) with the mental state of the defendant (knowingly participating). Reading a 'purpose' requirement into the statute renders the word 'knowingly' superfluous, as someone with the purpose to achieve a result will always know they have that purpose.
Analysis:
This decision resolves a circuit split, clarifying that § 1344(2) of the bank fraud statute has a broader scope than § 1344(1) and can be used to prosecute individuals who do not directly target a bank. The Court's key contribution is the introduction of a limiting principle based on the 'by means of' clause, which seeks to curb the statute's potential reach over traditional state-level crimes. This 'mechanism naturally inducing payment' standard prevents the federalization of all frauds involving checks but creates a new area for legal argument, as highlighted in the concurrences, regarding how direct the connection between the false statement and the bank must be.
