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United States v. Warren S. Chang

Court of Appeals for the Ninth Circuit
54 Fed. R. Serv. 148, 207 F.3d 1169, 2000 Cal. Daily Op. Serv. 2628 (2000)
ELI5:

Rule of Law:

To "utter" a counterfeit foreign obligation under 18 U.S.C. § 479, one must offer the instrument to another while representing it as genuine with an intent to defraud. This act is complete even if the instrument is offered to an intermediary, such as a custodian, as a necessary step to defraud a third party in a related transaction.


Facts:

  • Warren H.S. Chang, acting on behalf of the Panorama Foundation, acquired a Japanese 'Certificate of Payback Balance' with a purported face value of 300 billion yen.
  • Chang and his associate, Harry New Blum, entered into negotiations with Midland Bank to use the Certificate as collateral for a loan.
  • The loan transaction with Midland Bank required the Certificate to be placed in the custody of a trust company.
  • On October 18, 1995, Chang and Blum met with James L. Birdwell, a Vice President at BNY Western Trust Company (BNY), to arrange for BNY to act as the custodian for the Certificate.
  • During their dealings with BNY, Chang and Blum represented that the Certificate was authentic and that they would provide documentation to prove it.
  • On February 28, 1996, Chang and Blum met with Birdwell again, bringing the original Certificate and a black light to demonstrate its authenticity features.
  • This meeting was arranged for the purpose of BNY taking custody of the Certificate, which would then facilitate the finalization of the loan from Midland Bank.

Procedural Posture:

  • On October 25, 1996, a federal grand jury indicted Warren H.S. Chang and a co-defendant on charges including conspiracy and uttering a counterfeit foreign obligation.
  • The case was tried before a jury in the U.S. District Court.
  • On December 9, 1996, the jury convicted Chang on all counts.
  • The district court sentenced Chang to 63 months in prison on the conspiracy count, to run concurrently with lesser sentences on the other counts.
  • Chang (appellant) appealed his conviction and sentence to the United States Court of Appeals for the Ninth Circuit.

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Issue:

Does presenting a counterfeit foreign security to a custodian bank as a required step in securing a loan from a third-party bank constitute 'uttering' the security under 18 U.S.C. § 479?


Opinions:

Majority - Fisher, Circuit Judge

Yes. Presenting a counterfeit security to a custodian to facilitate a loan from a third party constitutes 'uttering' under 18 U.S.C. § 479. The court reasoned that 'uttering' is tantamount to an offer, made with an intent to defraud. The evidence showed Chang made a firm offer to place the Certificate with BNY; he brought the original document and had authority to sign the custody agreement. Chang's argument that this was merely a 'bailment for safekeeping' fails because, unlike a simple deposit, this act was done with fraudulent intent. The intent was twofold: to induce BNY to insure the certificate and issue an asset statement, and more broadly, to defraud Midland Bank, which required BNY's custody as a condition for the loan. Alternatively, the court found sufficient evidence that Chang had uttered the certificate directly to Midland Bank, as placement with BNY was merely a condition precedent to completing the loan, not to making the initial fraudulent offer.



Analysis:

This decision clarifies that the scope of 'uttering' under federal counterfeit statutes extends beyond direct commercial exchanges. The court established that using a counterfeit instrument as an essential component in a larger fraudulent scheme, such as collateralization or custodial placement to induce a third party's reliance, satisfies the element of the crime. This broad interpretation prevents defendants from evading liability by arguing they did not 'pass' the instrument for direct payment to the immediate recipient. The ruling solidifies that the requisite intent to defraud can be aimed at any party within the chain of a fraudulent transaction, not just the person or entity taking immediate possession of the counterfeit item.

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