Bank Fraud – A bank does not have a cognizable property interest in the accuracy of its financial records or an employee’s salary and bonus if the employee is otherwise doing the job they have been paid for, despite other conduct.
Bank executives Diana Yates and Dan Heine were each charged on one count of conspiracy to commit bank fraud under 18 U.S.C. § 1349 and twelve counts of making false bank entries under 18 U.S.C. § 1005. Specifically, the two had taken several steps to paint a false picture of the bank’s financial status by lying to the Board of Directors and shareholders, reporting false or misleading information on the performance of loans, and making unauthorized transfers of bank proceeds. They did not attempt to pay themselves or enrich themselves as a part of this scheme.
Throughout their jury trial, the Government argued that the defendants conspired to deprive the bank they worked for of three specific property interests: 1) the bank’s interest in accurate financial records, 2) the defendants’ own salaries and bonuses, and 3) the use of the bank’s funds. Yates and Heine were convicted on all charges and timely moved for a judgement of acquittal on the grounds that the Government’s theory of conspiracy was legally insufficient. The district court denied the motion, and the defendants appealed.
Reviewing the case de novo, the Ninth Circuit vacated all convictions for both defendants and remanded. The bank had no legitimate property interest in either the accuracy of its financial records or the pre-existing salaries being drawn by its employees—even if those employees were in fact trying to defraud it as well as doing their jobs—and so it would not be fraud to deprive it of those things. The Government relied heavily on these theories in the presentation of its case, and the district court did not correct the error in jury instructions or otherwise, and so the error is not harmless.
With the invalidation of the conspiracy count, the other charges were also invalidated. The district court instructed the jury that they could find the defendants guilty of those charges as co-conspirators. Such an instruction is a valid statement of the law, but only when there is a cognizable conspiracy.
Judge Bress dissented, arguing that the majority mischaracterized the Government’s theory of conspiracy at trial.
Appeal from the District of Oregon
Opinion by Miller, joined by Berzon
Dissent by Bress
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