Breaking News

Argument analysis: Something for both sides in bank fraud argument

After slightly less than an hour of oral arguments in the case of Lawrence Shaw, who was convicted on bank fraud charges after he stole over $300,000 from Stanley Hsu’s checking account, it seemed clear that, although Shaw and other similarly situated defendants would lose the war, Shaw could at least win the battle. The justices seemed ready to reject Shaw’s argument that he could not be convicted of bank fraud because the bank itself was not harmed by the theft, but at the same time they were more sympathetic to his contention that the instructions given to the jury that convicted him were flawed.

Representing Lawrence Shaw, Deputy Federal Public Defender Koren Bell repeatedly insisted that the federal bank fraud statute under which Shaw was convicted – which makes it a crime to knowingly carry out a “scheme or artifice to defraud a financial institution” – requires an intent to impose a financial loss on the bank itself. But the justices were immediately skeptical of this argument. Justice Stephen Breyer (displaying an impressive knowledge of both pop culture and current events) asked Bell to address the plight of reality star Kim Kardashian, who was recently robbed of millions of dollars of jewelry in a Paris apartment. If all of Kardashian’s jewelry is insured (or, Breyer suggested, even over-insured), so that she won’t actually lose any money from the robbery, is it really theft? Or, Breyer continued, if a jewelry cleaner comes to Kardashian’s door and cons her into giving him the jewelry, and he believes it doesn’t belong to her but is instead on loan, isn’t that still fraud? Breyer clearly believed that the answer in both cases was yes.

Justices Samuel Alito and Anthony Kennedy later echoed Breyer’s doubts about Shaw’s proposed rule. Depriving the bank of a property right in something, Alito told Bell, is not the same thing as causing a loss to the bank. In this case, for example, the bank may not have lost any money as a result of Shaw’s conduct, but it definitely had a property interest in the money that Shaw took from Hsu’s account. And Kennedy asked Bell whether it would be legal to intentionally deprive someone of a property interest in something, as long as there was no economic loss. “You want us to write that?” Kennedy said dubiously.

The justices seemed more interested in whether, even if the government’s interpretation of the bank fraud statute is correct and the defendant does not need to intend to take money from the bank, the instructions that were given to the jury that convicted him did not reflect that understanding of the law. In one instruction, for example, the district court told jurors that the phrase “scheme to defraud” “means any deliberate plan of action or course of conduct by which someone intends to deceive, cheat, or deprive a financial institution of something of value.”

Chief Justice John Roberts and Justice Elena Kagan both suggested (and Bell agreed) that the instruction’s use of the word “or” meant that the jury could have convicted Shaw based solely on a finding that he had intended to deceive or cheat the bank, without requiring that anything of value be taken. The government, Kagan observed, would read the instruction as requiring the jury to find that Shaw intended to “deceive a bank of something of value.” “Whoever would use words like that,” Kagan complained. “It doesn’t make sense.”

Anthony Yang, the assistant to the solicitor general arguing on behalf of the United States, resisted any suggestion that there was a problem with the jury instructions. If you look at all of the jury instructions together, he assured the justices, it is clear that they were consistent with the proper interpretation of the bank fraud statute.

But the justices were less convinced. Justice Sonia Sotomayor, the only justice who has served as a trial judge, lamented that the federal government seemed to have “forgotten that simplifying things for jurors is always a good thing.” We cannot assume, she emphasized, that jurors will parse their instructions as carefully as the government contends. And when Yang eventually conceded that the jury instructions were not “perfect,” but were good enough, Kennedy challenged him to provide a citation that the court could use to support that proposition. Should, Kennedy asked somewhat sarcastically, we say that it is “close enough for government work?”

Justice Ruth Bader Ginsburg appeared the most sympathetic to Shaw. In particular, she pressed Yang on whether (as Bell agreed) Shaw could have instead been charged and convicted under a different provision of the bank fraud statute, which makes it a crime to use false representations or pretenses to carry out a “scheme or artifice to obtain any of the moneys … or other property owned by, or under the custody or control of, a financial institution”; even if the bank did not lose money as a result of Shaw’s theft, the argument would go, the money in Hsu’s account would have clearly been in the bank’s “custody or control.” Yang countered that this provision would require the government to prove that Shaw made false representations, which is more difficult to do in cases involving transactions carried out over the Internet.

In the end, the most likely scenario still seemed to be that the justices would rule for the government on the broader question of how to interpret the bank fraud statute, but could still find that the jury instructions did not accurately reflect that interpretation. That outcome is hardly a certainty – in particular, Sotomayor asked Bell several questions about whether the second issue was properly before the court. Based on the oral argument, though, we could learn the answer relatively soon.

Recommended Citation: Amy Howe, Argument analysis: Something for both sides in bank fraud argument, SCOTUSblog (Oct. 4, 2016, 1:47 PM),