December 14, 2016
Authored by: Robert Klingler
Normally, a scheme to defraud another individual would be a state crime, prosecuted and sentenced at the state level (leaving aside use of U.S. mail or wires). To be convicted of the state crime of fraud usually requires proof of some combination of a false statement or representation and an actual intent to defraud.
On December 12, 2016, in a remarkably unpretentious opinion by Justice Breyer, the U.S. Supreme Court, in Shaw v. United States, U.S., No. 15-5991, resolved a circuit split by ruling that such a scheme can also constitute federal bank fraud, even if there was intent only to defraud the individual, not the bank itself.
The case stemmed from Shaw’s successful efforts to defraud a bank customer of more than $300,000. Shaw was convicted of violating 18 U.S.C. § 1344(1) which makes it a federal crime to “knowingly execut[e] a scheme . . . (1) to defraud a financial institution.” Shaw argued that to prove fraud it is necessary to show intent to defraud and he had no intent to defraud the bank – and, in fact, the bank did not lose any money. The Supreme Court affirmed a 9th Circuit opinion that no such proof was necessary to establish the federal crime of bank fraud, on the ground that a bank had a property interest in the use of the money deposited by its customers, even if the bank ultimately suffers no financial loss.