The Fifth Circuit Court of Appeals in U.S. v. Ryan affirms a bank fraud conviction under § 1344 (and also conspiracy – § 1349 and making false entries in bank records – § 1005). “Jurors were presented with evidence that [the defendant] conspired with others to misrepresent the ability of borrowers to repay their debts while acting as the President and CEO of [a bank] and Chairman of the Bank’s Board of Directors. “In
doing so, he deceived the Bank into issuing loans to insolvent borrowers who then covertly used those proceeds to make payments on their overdue and overdraft loans.” His arguments on appeal included insufficiency or the evidence and jury instructions. Using the 5th Circuit Pattern Jury Instructions, the court found the evidence sufficient in that “he (1) ‘knowingly executed a scheme or artifice’; (2) ‘to
defraud’ the Bank; (3) that he intended to do so; (4) that his ‘scheme or artifice to defraud was material’ because he ’employed a false material representation’ about several borrowers’ ability to repay their loans and ‘concealed material facts’ about those borrowers’ from the Board; and (5) that he placed the Bank ‘at risk of . . financial loss.’”
Most importantly, the Fifth Circuit court distinguishes the facts from the Supreme Court’s holding in Ciminelli, where the Court held “federal fraud statutes criminalize only schemes to deprive people of traditional property interests,” and that “potentially
valuable economic information,” which is “necessary to make discretionary economic decisions” is not a traditional property interest.” In distinguishing this from Ciminelli, the Firth Circuit states that “the Government’s case did not rely on a theory of deprivation of information. Instead, it detailed Ryan’s lies to get loans so that he could keep insolvent borrowers flush with cash, clear his subpar monthly reports, and in some instances, benefit monetarily given his business and lending relationships with borrowers.”
In the false entry charge under 18 U.S.C. § 1005, the Fifth Circuit noted that the government did not need to prove intent to cause the bank injury, but that the “defendant intended to defraud one or more of the bank’s officer, auditors, examiners, or agents.” The Fifth Circuit also explained how this was different from the Supreme Court’s holding in Thompson v. U.S. where the Court held that statements must be literally false, not merely misleading. In distinguishing Thompson from the current case, the Fifth Circuit notes that the defendant made “three affirmative false statements and five material omissions” and that he “knew these responses were literally false, not merely misleading, when he made them.”
This is what a bank fraud case looks like.
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