United States v. Scott A. Reaume
338 F.3d 577 (2003)
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Rule of Law:
The intent to defraud element of the federal bank fraud statute is satisfied when a defendant intends to defraud any entity, and that fraudulent scheme places a federally insured financial institution at a risk of loss, regardless of whether the bank was the intended victim or suffered an actual loss.
Facts:
- Scott A. Reaume and his associates opened several checking accounts at Monroe Bank and Trust, a federally insured financial institution, some under aliases.
- They made small initial deposits into these accounts.
- Reaume and his associates wrote checks from these accounts to purchase merchandise from various national-chain retailers, knowing the accounts contained insufficient funds.
- They subsequently returned the majority of the merchandise to different branches of the same retailers in exchange for cash.
- Monroe Bank and Trust identified the scheme early and refused to honor the checks for which there were insufficient funds.
- As a result of the bank's actions, the financial losses from the scheme fell upon the retailers or their check-guarantee companies, not the bank.
Procedural Posture:
- A federal grand jury indicted Scott A. Reaume on one count of bank fraud in violation of 18 U.S.C. § 1344.
- The case proceeded to a jury trial in the U.S. District Court.
- At trial, Reaume's defense theory was that his scheme was not intended to defraud the bank.
- The jury returned a guilty verdict.
- The district court sentenced Reaume to thirty months of imprisonment and ordered him to pay restitution.
- Reaume (Appellant) appealed the judgment of conviction and sentence to the U.S. Court of Appeals for the Sixth Circuit, arguing insufficiency of the evidence on the intent element.
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Issue:
Does a scheme to defraud merchants by writing bad checks, which places a bank at a risk of loss but does not result in an actual loss to the bank, satisfy the 'intent to defraud' element of the federal bank fraud statute, 18 U.S.C. § 1344?
Opinions:
Majority - Cole, Circuit Judge
Yes. The intent element of the bank fraud statute is satisfied because Reaume's scheme to defraud merchants placed the bank at a risk of financial loss. The court extended the reasoning of its prior decision in United States v. Everett, which held that bank fraud occurs when a scheme to defraud someone causes a bank to transfer funds. Here, although the bank did not actually transfer funds because it discovered the fraud, it was exposed to a risk of loss every time it received an insufficient funds check, as it had to make a decision whether to honor or dishonor it. The court reasoned that a defendant's criminal intent cannot logically turn on the subsequent, and fortuitous, course of action chosen by the bank. Therefore, a scheme that intends to defraud any entity and places a bank at risk of loss is sufficient to establish the intent required for a bank fraud conviction.
Analysis:
This decision significantly broadens the application of the federal bank fraud statute by clarifying the intent element. It establishes that the statute does not require prosecutors to prove the defendant specifically intended to defraud the bank or that the bank suffered an actual loss. By focusing on the 'risk of loss' created by the fraudulent scheme, the ruling makes it easier to prosecute check-kiting and other fraudulent schemes where the ultimate financial harm falls on third parties like merchants, as long as a federally insured bank was an instrumentality of the fraud and was exposed to potential liability.
