News & Events

The Supreme Court Clarified Bank Fraud Statute Does Not Require a Defendant to Intend to Defraud a Bank.

In December 2016, in a unanimous decision, the Supreme Court held in Shaw v. United States, 137 S.Ct. 462 (2016), that the Bank Fraud statute does not require the government prove the defendant intended to defraud a bank. The facts of the case are relatively straightforward and simple. Lawrence Shaw obtained the personal banking information of Stanly Hsu, a U. S. Citizen living in Taiwan. Using this information, Shaw transferred $300,000.00 from Hsu’s bank account to accounts controlled by Shaw. Shaw was charged with Bank Fraud, 18 U.S.C. § 1344, for stealing the funds in the bank account. Shaw was convicted but argued on appeal and in the Supreme Court that while he did intend to defraud Mr. Hsu, he never intended to defraud the bank, nor did he intend to obtain the bank’s funds. Shaw’s position was that the funds in the account belonged to Hsu, not the bank, and thus the bank was not defrauded.

The Court, with very little discussion, made short work of Shaw’s argument that the Bank Fraud statute requires intent to defraud the bank. The Court noted that the Bank Fraud Statute has two sections which make it a crime to:

 “Knowingly execut[e] a scheme …

“(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.”

Using the plain meaning of the statute, the Court noted the statute does not contain a specific intent requirement to defraud the bank. Thus, it makes no difference whether the funds were the account holder’s or the bank’s. The statute only requires that the bank was deprived of the use of the property, even it ultimately did not suffer an unreimbursed loss.

Moreover, the Court rejected Shaw’s argument that the funds belonged to Hsu and not the bank. The Court held that it does not matter who owns the funds; the issue is whether the bank simply possessed the funds. Even though Shaw did not intend to defraud the bank, he did have a scheme to obtain funds that were under the custody and control of the bank and that was enough to satisfy the mens rea element.

This decision is consistent with the well-established law that the scheme to defraud is the evil prohibited by the statute. There is no requirement that the scheme be successful, only that the funds of the bank be placed at risk. All the statute requires is that “the scheme . . . be one to deceive the bank and deprive it of something of value.”

While this case does not seem ground breaking, it does put to rest many defenses in bank fraud cases that have inundated the lower courts.  Shaw sets a consistent precedent nationwide and strengthens the government’s hand in bank fraud prosecutions.

 

by Stephen C. Parker

Steve Parker