United States v. Thomas ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
12-31-2002
USA v. Thomas
Precedential or Non-Precedential: Precedential
Docket No. 01-4283
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PRECEDENTIAL
Filed December 31, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-4283
UNITED STATES OF AMERICA
v.
LISA THOMAS,
Appellant
Appeal from the United States District Court
For the Eastern District of Pennsylvania
D.C. No.: 99-cr-00722-1
District Judge: Honorable J. Curtis Joyner
Argued: October 15, 2002
Before: BECKER, Chief Judge, ROTH and
ROSENN, Circuit Judges.
(Filed: December 31, 2002)
Anita D. Eve (Argued)
Suite 1250
Office of United States Attorney
615 Chestnut Street
Philadelphia, PA 19106
Counsel for Appellee
Mark S. Greenberg (Argued)
Stephen R. LaCheen & Associates
225 South 15th Street
3100 Lewis Tower Building
Philadelphia, PA 19102
Counsel for Appellant
OPINION OF THE COURT
ROSENN, Circuit Judge.
The major issue in this appeal is a troublesome question
concerning the correct construction of the federal bank
fraud statute. We are called upon to construe the breadth
of a statute on which the Courts of Appeals are divided,
and on which our own court has not spoken definitively. A
grand jury in the United States District Court for the
Eastern District of Pennsylvania returned a three-count
indictment charging the defendant, Lisa Thomas, with two
counts of bank fraud in violation of 18 U.S.C. S 1344 and
one count of fraudulently inducing a person to travel in
interstate commerce in violation of 18 U.S.C. S 2314. The
District Court granted the Government’s motion to dismiss
Count III, one of the two bank fraud counts. A jury found
the defendant guilty on the remaining two counts. The
defendant’s motion for judgment of acquittal was denied.
The District Court sentenced the defendant to two
concurrent thirty-three month sentences, supervised
release, and restitution in the sum of $133,300.
Prior to sentence, the defendant objected to the
imposition of a two-level upward adjustment for abuse of
trust pursuant to U.S.S.G. S 3B1.3 and requested a two-
level downward adjustment for acceptance of responsibility
pursuant to U.S.S.G. S 3E1.1. The District Court denied
both requests. The defendant timely appealed her
convictions of bank and travel fraud and related sentencing
issues. We reverse the conviction as to bank fraud and
affirm the conviction as to travel fraud, and remand for
resentencing.
2
I.
The primary issue on appeal is whether there was
sufficient evidence to sustain Thomas’s conviction of bank
fraud in violation of 18 U.S.C. S 1344. Anne Weygandt, then
aged 88, employed Thomas as a home health care aide in
and around 1998. Weygandt believed herself to be in fair
health during that period, although she had suffered a
small stroke in 1997. Around that time, Weygandt
frequently made loans to her nephew and also authorized
others, including Thomas, to complete checks which she
had pre-signed, by filling in the amount and name of the
payee. These checks were used for various purposes,
including the payment of bills. Thomas also received and
sorted Weygandt’s mail. From November 1997 to July 1998,
Thomas induced Weygandt to sign numerous checks for the
pretextual purpose of transferring money among
Weygandt’s several bank accounts or for the purchase of
groceries. Instead, Thomas cashed the checks, made out
either to Thomas or to cash, at Weygandt’s banks, and
pocketed all or most of the proceeds. She withdrew
approximately $124,300 from Weygandt’s Mellon Bank
accounts and $9,400 from her Citizen’s Bank account.
Weygandt was physically present at the bank with
Thomas when the withdrawals occurred, and she herself
endorsed those checks made out to cash. After Thomas
originally sought to cash Weygandt’s checks by herself, one
of the tellers insisted that Weygandt be present before the
bank would honor the checks. Despite Weygandt’s
presence, the transactions still aroused the suspicion of
bank tellers, who asked Thomas the purpose of the
withdrawals. Either Thomas or Weygandt would always
respond that the money was for travel, or for transfers
among Weygandt’s accounts, or for shopping. A teller
showed Weygandt her account balance on at least one
occasion, to be sure she grasped the magnitude of her
withdrawals. Notwithstanding, Weygandt had no idea of the
amounts being withdrawn, or their true purpose. Weygandt
physically received the money from the teller some of the
time, and on other occasions, Thomas received the money.
However, Weygandt repeatedly expressed her authorization
of the withdrawals when the tellers inquired, and never
3
repudiated the transactions. Despite suspicions over the
validity of the withdrawals, given their frequency and the
amount of cash being issued, bank staff never
communicated with police or their internal fraud
investigators.
Weygandt’s nephew became apprehensive of Thomas’s
conduct and communicated with the police. A State Police
investigator confronted Thomas, and she later admitted in
a written statement that Weygandt requested her
assistance in writing her checks to pay bills, because
Weygandt could not fully write them out herself. Thomas
went on to state that, because she needed money to fund
her drug addiction, she convinced Weygandt to sign checks
for her on the pretense of transferring money among her
bank accounts, Weygandt having asked her to transfer
money for legitimate purposes in the past, and thus being
unlikely to become suspicious.
At trial, defense counsel argued essentially that the facts
here do not constitute a federal crime of bank fraud. It was
not seriously contested that Thomas had acted wrongfully.
However, the defense contended that the federal bank fraud
statute required that the defendant intend to cause the
bank a loss and that the defendant make a material
misrepresentation to the bank. Here, the defense argued,
the banks were not exposed to a loss as a result of
honoring Weygandt’s checks, because the checks were
properly made payable to Thomas or to cash, and Weygandt
had vouched for their legitimacy. Thus, only Weygandt
suffered losses and the banks were not subject to any
losses or potential liability for honoring the checks.
Furthermore, Thomas contended that there was no material
misrepresentation because Thomas had not affirmatively
deceived the bank, but had merely presented the checks
and passively accepted the proceeds.
At trial, Thomas also objected to the admission of a
handwritten summary by a State Police investigator listing
all the checks cashed by Thomas and the monies
converted. At the end of the 6-page list, itemizing each
individual check, appeared the statement: "Total Value of
Fraud from Mellon Checking $118,550.00." Thomas
asserted that the word "Fraud" should have been redacted.
4
She also argued that the District Court’s curative
instruction, informing the jury that fraud was a conclusion
for it to make, not the witness, was insufficient to overcome
the resulting prejudice.
II.
We have jurisdiction pursuant to 28 U.S.C. S 1291 over a
judgment of conviction and sentence. Our review of a
district court’s interpretation of the scope and coverage of
the bank fraud statute is plenary. United States v.
Schwartz, 899 F.2d 243, 243 n.1 (3d Cir. 1990).
The federal bank fraud statute briefly provides:
Whoever knowingly executes, or attempts to execute, a
scheme or artifice--
(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;
shall be fined not more than $1,000,000 or imprisoned
not more than 30 years, or both.
18 U.S.C. S 1344.
The meaning of the first line of the statute is not
disputed. "The terms ‘scheme’ and ‘artifice’ are defined to
include any plan, pattern or cause of action, including false
and fraudulent pretenses and misrepresentations, intended
to deceive others in order to obtain something of value,
such as money, from the institution to be deceived." United
States v. Goldblatt, 813 F.2d 619, 624 (3d Cir. 1987). As to
subsections (1) and (2), the Government maintains:
Both subsections prohibit schemes or artifices
fraudulently to obtain money or property owned by or
held in the custody of a financial institution. The
difference is that, under subsection (1), the fraud
victim must be a bank, whereas under subsection (2),
the victim need not be a bank as long as property
5
under the custody and control of a bank is obtained
through false and fraudulent pretenses or
representations.
Government’s brief at 27. The Government also notes that
the indictment charged Thomas with both prongs of the
statute which permitted Thomas to be convicted if the
Government proved the elements of either subsection. It
contends that our decision in United States v. Monostra,
125 F.3d 183 (3d Cir. 1997), holds that the requisite
criminal intent "may be met by the government showing
that the defendant engaged in conduct with a financial
institution which resulted in the improper release of money
deposited with the institution," or by showing that the bank
was exposed to a loss of its own property. Government’s
brief at 29, 30-31.
As Thomas admits in her confession, her crime involved
a pattern of activity intended to deceive others, including
acquiring Weygandt’s trust, making deceptive
misrepresentations to her, and some to the bank. The
deceptions were employed systematically by Thomas and
constituted a manifest departure from fundamental
honesty. The issue before us, however, is not whether there
was a scheme or artifice afoot; rather, we must address
whether that scheme defrauded or attempted to defraud a
financial institution in violation of the statute.
Subsection (1) requires that the scheme or artifice must
be intended "to defraud a financial institution." We have
held that a "scheme to defraud" is measured"by
determining whether the scheme demonstrated a departure
from fundamental honesty, moral uprightness, or fair play
and candid dealings in the general life of the community."
Goldblatt, 813 F.2d at 624. The statute’s use of the term
thus means that the defendant, through the exercise of a
scheme that departs from fundamental honesty, must
thereby intend to defraud the bank.
Subsection (2), however, facially requires only that the
perpetrator engage in a "scheme or artifice" in order to
obtain bank funds or funds in bank custody. The use of the
disjunctive "or" connecting the two subsections seems to
indicate that the two connected subsections of the statute
6
are to be given independent, or disjunctive effect. This is
also the Government’s position. It asserts that, under
subsection (2), the victim "need not be a bank as long as
property under the custody and control of a bank is
obtained." A disjunctive reading of the two sections, as
proposed by the Government, gives the statute a breadth of
scope that extends well beyond what Congress intended the
statute to regulate. Subsection (2), unlike (1), provides only
the most tenuous nexus between the scheme or artifice and
the institution of banking, which Congress sought foremost
to protect. An examination of the Congressional history of
the statute reveals that Congress enacted the statute for
the purpose of protecting financial institutions from the
perpetration of fraud on them, leaving to states the
traditional prosecution of crimes of larceny, embezzlement
and fraudulent conversions. See S.Rep. No. 98-225 at 377
(1984), reprinted in 1984 U.S.C.C.A.N. 3182, 3517 ("Clearly
there is a strong federal interest in protecting the financial
integrity of [banking] institutions.").
Under the Government’s theory, almost any scheme in
which a victim withdraws money from a bank and turns it
over to the perpetrator would become fair game under the
statute. Such a reading of the statute is irreconcilable with
Congressional intent; such conduct has only a remote and
hypothetical effect on the integrity of banking. Subsection
(1), which requires a nexus of harm or loss to the bank,
seems a far more rational expression of the federal interest
here. Nonetheless, the "plain meaning" is our starting point.
We do not lightly disregard the statutory language.
Immigration and Naturalization Serv. v. Elias-Zacarias, 502
U.S. 478, 482 (1992). However the weight of the
Congressional legislative history and the plausible
construction of it by some of our sister courts counsel in
favor of a conjunctive reading of the subsections of the
statute, limiting it to fraud perpetrated on financial
institutions.
The Courts of Appeals are not of one mind as to the
proper reading of the statute, including whether the intent
requirement of subsection (1) applies to any indictment
pled under the statute, or whether subsection (2) can be
read wholly independently of subsection (1). See United
7
States v. Everett, 270 F.3d 986, 990 (6th Cir. 2001). This
court has spoken equivocally on the matter, making it
extremely difficult for the District Court to discern the
applicable state of the law. We have left an open question
whether it is appropriate to read subsection (2)
disjunctively. Despite the court’s observation in Monostra
that there is substantial evidence that Congress intended
subsection (2) to underscore the scope of subsection (1),
rather than to set forth a separate offense, it merely
suggested, without making a definitive ruling, that the two
subsections are to be read in unison. See Monostra 125
F.3d at 183. In an earlier decision, this court held that the
two subsections were to be read disjunctively. See
Schwartz, 899 F.2d at 248.
We note, however, that in Schwartz the court considered
whether an indictment pled solely under subsection (1)
must allege "false or fraudulent pretenses, representations
or promises," factors which are stated only in subsection
(2). The court held that it does not, and that a case pled
under subsection (1) does not necessarily require that any
element of subsection (2) must also be proven. Id. at 246.
The later Monostra decision did not hold that subsection (2)
limits the scope of subsection (1), but rather that
subsection (2) broadens the scope of subsection (1) to
include situations where property merely in "the custody
of " the bank is taken. In Monostra, the court considered
whether a prosecution under subsection (1) is deficient
because it involves the taking of a depositor’s funds, rather
than a bank’s funds, and because subsection (1) on its face
does not cover such instances. 125 F.3d at 186. Monostra
held that the two subsections should probably be read
conjunctively to the extent that subsection (2) underscores
the range of situations in which the statute might apply,
including the taking of funds in bank custody. Monostra did
not hold that subsection (1), read alone in the disjunctive,
could not itself set forth a bank fraud violation. To the
contrary, its holding contemplates that subsection (1) on its
own terms does set forth a violation and that subsection (2)
simply broadens its scope. Id. at 187. ("Given Congress’s
aim of creating a statute that would empower federal
prosecutors to pursue all forms of bank fraud, it is evident
that S 1344(2) was mainly intended to underscore the
8
breadth of the statute’s reach.") This merely clarifies
Schwartz’s holding.
What Monostra did not hold, but what its reasoning
plainly suggests, is that there can be no such thing as an
independent violation under subsection (2). To convict at all
under the bank fraud statute, there must be an intent to
defraud the bank. Bank fraud may involve a scheme to take
a bank’s own funds, or it may involve a scheme to take
funds merely in a bank’s custody. Similarly, it may involve
a scheme involving "false or fraudulent pretenses,
representations or promises." We recognize that although
"false or fraudulent pretenses, representations or promises"
are optional under the statute, a material representation is
a required element of proof to show any violation of the
bank fraud statute. Neder v. United States, 527 U.S. 1, 25
(1999)("[W]e hold that materiality of falsehood is an element
of the federal mail fraud, wire fraud, and bank fraud
statutes.") But the sine qua non of a bank fraud violation,
no matter what subdivision of the statute it is pled under,
is the intent to defraud the bank.
To reach this conclusion, we have plumbed the
Congressional history. Congress enacted the bank fraud
statute to fill the gaps existing in federal jurisdiction over
"frauds in which the victims are financial institutions that
are federally created, controlled or insured." S.Rep. No. 98-
225 at 377 (1984), reprinted in 1984 U.S.C.C.A.N. 3182,
3517. The statute is primarily concerned with "fraudulent
schemes where banks are victims." H.R. Rep. No. 98-901
(1984). These pronouncements in the legislative history
strongly suggest that the legislature wanted the intent
requirements of subsection (1) to apply to any indictment
under the statute, and that, in order to prove bank fraud,
a bank must be more than a mere incidental player. A
defendant must have deliberately targeted his or her
scheme at the banking institution.
Moreover, as Judge Nygaard noted in Monostra, Congress
modeled the bank fraud statute closely upon the mail fraud
statute, which has very similar language. 125 F.3d at 186-
87; see 18 U.S.C. S 1341. Courts have routinely looked to
Congressional intent with respect to construction of the
mail fraud statute for guidance in interpreting the bank
9
fraud statute. 125 F.3d at 186-87. In Monostra , we noted
that the Supreme Court, in McNally v. United States, 483
U.S. 350 (1987), held that Congress intended the second
dependent clause of the mail fraud statute to broaden the
scope of the first clause. The mail fraud statute was thus
intended to cover "any scheme or artifice to defraud,"
including any "[scheme] for obtaining money or property by
means of false or fraudulent . . . promises." According to
McNally, the second clause made clear that the statute
extended to cover deceptive misrepresentations about the
future, i.e., promises, as well as misrepresentations about
the present. Because the bank fraud statute was modeled
after the mail fraud statute, the correct syntactical
construction of the mail fraud statute sheds light on the
appropriate construction of the bank fraud statute. Thus,
subsection (2) does not set forth an independent basis of
liability.
Read in this light, subsection (2) of the bank fraud
statute "underscores the breadth" of subsection (1). Under
Monostra, subsection (2) would not provide a separate basis
of criminal liability under the statute. The Court of Appeals
for the Second Circuit in United States v. Blackmon, 839
F.2d 900 (2d Cir. 1988), largely concurs in this assessment.
In Blackmon, the court noted that the requisite criminal
intent to "victimize a bank" which is apparent from reading
the Senate reports on the statute, and which the courts
have implied into subsection (1), was intended to apply to
all crimes alleged under the statute. Id. at 905-06. Thus, to
take money in the custody of a bank is not a crime under
the statute unless there is a concomitant intent to victimize
the bank. In United States v. Rodriguez, 140 F.3d 163, 167
n.2 (2d Cir. 1998), the Court of Appeals again held that a
deceptive pattern of conduct designed to deceive a bank
was required to prove a case under either subsection (1) or
(2).1 The Courts of Appeals for the Fifth and Seventh
Circuits have also determined that the intent-to-victimize
_________________________________________________________________
1. Thus, to the extent that the Court of Appeals for the Second Circuit
formally reads the statute in the disjunctive, we perceive no meaningful
difference in our interpretation of the statute, because the Second
Circuit implies the intent requirement of subsection (1) to cases brought
under subsection (2) of the statute.
10
requirement of subsection (1) pervades the statute, and is
a necessary element of an indictment under either
subsection (1) or (2). Accord, United States v. Sprick, 233
F.3d 845, 852 (5th Cir. 2000); United States v. Davis, 989
F.2d 244, 246-47 (7th Cir. 1993).2
The Second Circuit Court of Appeals rejected a stark
reading of subsection (2) in Blackmon, a pigeon drop case.
In a pigeon drop scheme, the victim is induced to take
money out of the bank and to hand that money over to the
perpetrators of the scheme. Id. at 903. In some attenuated
sense, the perpetrators did intentionally cause the loss of
funds in bank custody, inasmuch as they knew the money
was withdrawn solely for the purposes of the victim’s
participation in their scheme. The court, however, rejected
the proposition that this crime should fall under the bank
fraud statute, because there was no way the crime could
have been viewed as intended to victimize or defraud the
bank. Id. at 905. Although the funds were derived from the
bank, it could not reasonably be said that the fraud
harmed the bank’s integrity. Id. at 906 (noting that
protecting a bank’s integrity underlies the Congressional
intent). Money is taken from banks every day for countless
foolish purposes, but in such instances, banks are not
exposed to liability nor is their integrity compromised.
Moreover, to hold otherwise would seriously diminish the
jurisdiction of state criminal law.
Thus, in Blackmon, the court noted that"terms
_________________________________________________________________
2. In United States v. Everett, 270 F.3d 986 (6th Cir. 2001), the Court of
Appeals for the Sixth Circuit took a contrary view, one espoused by the
Government in this case. The court held that the statute must be
assigned its plain meaning and that its two provisions are to be read
entirely disjunctively, and, thus, that under subsection (2) there is no
requirement that the defendant intend to defraud the bank. Under this
court’s holding, to prove a subsection (2) violation, the Government must
merely show that defendant, "in the course of committing fraud on
someone causes a federally insured bank to transfer funds under its
possession and control." Id. at 991. The court reasoned that the
unquestionably broad sweep of the statute under this construction
would be contained by the exercise of prosecutorial discretion. We are
not so sanguine about leaving this broad discretion with a prosecuting
agency.
11
connected in the disjunctive need not always be construed
independently so that the limits applicable to one term are
inapplicable to the second, especially when such a
construction would leave the statute’s outer boundaries
ambiguous, and involve the federal government in areas
more properly left to states and localities." Id. at 905 n.5.
Thus the court held that subsection (2) is delimited by the
intent requirements of subsection (1) of the statute. Absent
a limiting principle, the outer reach of the statute is
extended far beyond what Congress intended.
In United States v. Bass, 404 U.S. 336, 349 (1971), the
Supreme Court held that "unless Congress conveys its
purpose clearly, it will not be deemed to have significantly
changed the federal-state balance. Congress has
traditionally been reluctant to define as a federal crime
conduct readily denounced as criminal by the States." We
are disinclined to read a statute in a manner which permits
it to trench on the domain of traditional state criminal law,
circumscribed only by the exercise of prosecutorial
discretion. The extension proposed here by the Government
offends the balance of federal and state jurisdiction and our
principles of comity by imposing federal law where the
federal interest is remote and attenuated. We hold,
therefore, that conduct, reprehensible as it may be, does
not fall within the ambit of the bank fraud statute when the
intention of the wrongdoer is not to defraud or expose the
bank to any loss but solely to defraud the bank’s customer.
Our holding today is consonant, not only with
Congressional intent but also with our federal criminal law
jurisprudence.
III.
A.
Our holding that the statute is to be read conjunctively
does not end this matter. We must still decide the thorny
question of what is meant by the subsection (1)
requirement that the defendant intends to defraud the
bank. The Government’s position is that the banks were
exposed "to the real threat of civil liability for having
12
succumbed to Thomas’s conduct and the loss of the use of
the money that was withdrawn." The Government, however,
cites no authority for this proposition, one that is highly
speculative. We see no evidence that there was civil liability
or that Thomas intended to expose the bank to a loss. The
Government also suggests that mere "deceptive conduct"
toward the bank establishes intent to defraud. We disagree.
See, e.g., State v. Weigel, 477 A.2d 372, 462 (N.J. Super.
1984)("In common parlance, the word ‘defraud’ means to
cheat or wrongfully deprive another of his property by
deception or artifice.") Congress sought to proscribe
conduct that "victimize[d]" banks, which suggests that the
bank must be deliberately harmed before the statute is
violated. We believe that, given the legislative intent, harm
or loss to the bank must be contemplated by the wrongdoer
to make out a crime of bank fraud. See United States v.
Brandon, 298 F.3d 307, 312 (4th Cir. 2002); United States
v. Sprick, 233 F.3d 845,852 (5th Cir. 2000); United States
v. Blackmon, 839 F.2d at 905-06; United States v. Moede,
48 F.3d 238, 242 (7th Cir. 1995).3
The legislative history shows that Congress sought to
allay crimes that undermined public confidence in banking
institutions. See Blackmon, 839 F.2d at 906. ("[W]here the
victim is not a bank and the fraud does not threaten the
financial integrity of a federally controlled or insured bank,
there seems to be no basis in the legislative history for
finding coverage under [subsection (2)].") The deception of a
bank as an incidental part of a scheme primarily intended
to bilk a bank customer does not undermine the integrity
of banking. Our reading of the Congressional intent is also
supported by the Court of Appeals of the Seventh Circuit.
Writing for that court, Judge Posner stated that"the
_________________________________________________________________
3. Cases that take a contrary view are United States v. Ponec, 163 F.3d
486, 488 (8th Cir. 1998)(suggesting that "intent to defraud," does not
necessarily entail "loss to the institution, either actual or intended," but
rather any deception directed at the bank, even if the goal of the scheme
is solely to take the property of another person); United States v. Hollis,
971 F.2d 1441, 1452 (10th Cir. 1992) (suggesting that "[a] person
violates the bank fraud statute when he knowingly executes a scheme to
obtain money from a financial institution by means of false or fraudulent
representations.").
13
purpose [of the bank fraud statute] is not to protect people
who write checks to con artists but to protect the federal
government’s interest as an insurer of financial
institutions." Davis, 989 F.2d at 247. In that case, facially
valid checks, issued by the IRS as a tax refund to a person
who, in fact, was owed no tax refund, were deposited at a
bank. The bank was, of course, deceived as to the
entitlement of the payee to the money, whether by
affirmative deception or passive, material omission. Yet,
according to Judge Posner, only when the Government
proves the existence of civil liability is the bank truly
endangered by the fraud. Cashing facially valid checks,
even where the bank is deceived as to their legitimacy, does
not expose the bank to liability and, therefore, there is no
bank fraud. Honoring those checks did not "endanger" the
bank’s integrity. Id. at 247. People write checks "to con
artists" or for many other imprudent purposes every day,
but this does not undermine the integrity of the bank as to
give rise to a federal interest. Clearly, however, when the
scheme targets the bank as its direct victim, not a
depositor, and the bank suffers a loss of its funds, there is
no civil liability requirement. This was the case in United
States v. Goldblatt, 813 F.2d 619, 623-24 (3d Cir. 1987).
The Court of Appeals for the Second Circuit also holds,
and we agree, that a defendant must intend to cause a
bank a loss or potential liability, whether by way of
"statutory law, common law, or business practice." United
States v. Laljie, 184 F.3d 180, 191 (2d Cir. 1999). We
believe that this holding is effective shorthand for the
legislative intent that the statute would proscribe conduct
which undermines the integrity of federally insured
institutions. See S. Rep. No. 98-225, at 377 (1984),
reprinted in 1984 U.S.C.C.A.N. 3182, 3517 (noting that the
statute was intended to protect the "financial integrity" of
banks). The reputation and integrity of banking are harmed
when a bank is victimized in a way that exposes it to
liability. Conduct which exposes a bank to liability casts
the institution of banking into doubt by adversely affecting
its image with the public. It implicates the federal interest
in maintaining the integrity and esteem of our federally
insured banks.
14
Laljie illustrates the kind of distinction we make between
schemes which victimize banks by exposing them to
liability or loss, and schemes in which banks, despite being
the target of deception, are mere "unwitting
instrumentalities" to the fraud. 184 F.3d at 190. Laljie
addressed two distinct accusations of bank fraud. The first
involved an employee’s presentation of altered employer
checks to the bank. The defendant’s actions were directed
at deceiving the bank and exposed the bank to civil liability
for honoring the checks under New York law, under which
a bank may be held liable for paying conspicuously forged
or altered checks. In the latter scenario, however, the
employer signed the check, but deliberately left the payee
line blank. The defendant filled in the payee line but did
not otherwise alter the check. Although he deceived the
bank, he did not expose it to any loss. His conduct solely
victimized the maker of the check, and not the bank, which
incurred no loss. The bank merely served as "the unwitting
instrumentality of the fraud."
The victim in this latter case entrusted the defendant
with signed checks with the payees left blank. There is no
meaningful difference between this situation and one in
which an employer gave an employee keys to its cash box.
On the other hand, when an employee cashes some
employer’s forged checks, he or she harms the bank. The
public expects that a properly completed check will not be
used by other than its intended beneficiary and that banks
ought to be vigilant of forged or altered checks, and civil
liability reflects this public expectation. "The purpose of the
Commercial Code is to enhance the marketability of
negotiable instruments and to allow bankers, brokers, and
the general public to trade in confidence." Manor Bldg.
Corp. v. Manor Complex Associates, Ltd., 645 A.2d 843, 846
(Pa.Super.1994). The law governing bank liability for paying
on a fraudulent negotiable instrument thus serves to
vouchsafe public confidence in the banking system.
However, the public is unlikely to lose confidence in a
financial institution because it honors checks that some
individuals foolishly have allowed others to complete.
15
B.
Returning to the case at hand, we examine Delaware law
concerning the loss effect of Thomas’s fraudulent
endorsement or misuse of an employer’s checks, because
the two banks on which the victim’s funds were drawn were
in Delaware. The Government does not raise seriously the
issue of the banks’ loss but assumes that the mere act of
presenting fraudulently drawn checks to a bank for
payment constitutes a loss to it or a potential for liability.
The Government has not pointed to any case that
establishes actual or bank potential liability in such
situations, nor do we perceive any. Delaware law, in this
area, reflects the belief that the depositor is in a better
position to avoid the loss by carefully selecting its
employees or agents, in supervising them, and in adopting
measures to prevent forged endorsements on the
instruments drawn against the depositor. Thus, a bank is
subject to liability only when it fails to utilize"ordinary care
in paying or taking the instrument" when it is presented.
DEL. CODE ANN.TIT. 6 S 3-405. So long as a bankutilizes due
care, it may not be penalized for what is essentially the
negligence of its depositor.4
Where, however, an employee or agent is authorized by a
depositor to endorse the depositor’s checks, the appropriate
Uniform Commercial Code provision is DEL. CODE ANN. TIT.
6 S 3-307. It provides that where a check is endorsed by a
person so empowered and "made payable to the[endorsee]
personally, the taker does not have notice of the breach of
fiduciary duty unless the taker knows of the breach of
fiduciary duty." The depositor may have owed the endorsee
money for any number of legitimate reasons, and a bank
cannot be held liable for a transaction which appears
facially sound.
_________________________________________________________________
4. The Monostra decision, after positing that a depletion of bank deposits
might constitute a loss, concluded upon further reflection that civil
liability was required; that under Pennsylvania law, a bank might be
liable if the depositor "can show that the bank did not exercise ordinary
care in paying the check." 125 F.3d at 188. Furthermore, unlike the
instant case, Monostra dealt with forged checks.
16
In this case, Weygandt authorized Thomas to fill out the
payee line of the checks and the amount. The checks were
made out to cash or to Thomas personally. The bank has
no liability under section 3-405 in such circumstances,
inasmuch as there are no forged endorsements at issue.
Pursuant to section 3-307, a bank cannot be held liable for
abetting Thomas’s breach of fiduciary duty when the
checks were made out to Thomas personally, or to cash,
unless it actually knew of the breach of duty. A bank is not
"responsible for knowing to what entities the owner of the
account might make payments." Laljie, 184 F.3d at 191(discussing New York Uniform Commercial Code).
Moreover, even were there a colorable case for civil
liability set forth here, it must also be shown that Thomas
intended to victimize the bank. Even a scheme which does
expose a bank to a loss must be so intended. "[A] scheme
to pass bad checks [to merchants] is not bank fraud,"
because, even though the bank might honor the checks and
be civilly liable, the defendant did not anticipate that the
bank, rather than the merchant, would bear the loss.
United States v. Jacobs, 117 F.3d 82, 93 (2d Cir. 1997). In
United States v. Barrett, 178 F.3d 643, 648 (2d Cir. 1999)
the court held that one must look to the "entire
circumstances of defendant’s conduct as an indication of
the requisite criminal intent." Thomas’s actions, in fact,
demonstrate that she never intended to victimize the banks.
Her only victim was Weygandt.
IV.
Thomas argues that the admission of documents
prepared by the investigating police officer, King, was
reversible error. In a summary of all the checks cashed by
Thomas, King wrote, "Total Value of Fraud from Mellon
Checking $118550.00." Thomas argues that the existence
of fraud was a conclusion to be made by the jury and that
the use of the word "fraud" by a Government witness was
a usurpation of this jury function.
In United States v. Zehrbach, 47 F.3d 1252 (3d Cir.
1995), this court held that a proper curative instruction
could negate a manifestly improper statement by the
17
prosecutor in the course of closing argument that
defendants were guilty of the charged offense. The
prosecutor stated: "I suggest you shouldn’t believe [the
defense witnesses] because they’re guilty of exactly the
same bankruptcy fraud that these two defendants are
guilty of. And don’t you assume that they are not going to
get what’s coming to them either." 47 F.3d at 1264. The
court held that the expression of the prosecutor’s personal
opinion jeopardizes the defendant’s right to be tried solely
on the basis of the evidence presented to the jury because
his opinion "carries with it the imprimatur of the
Government and may induce the jury to trust the
Government’s judgment rather than its own view of the
evidence." 47 F.3d at 1265. In this case, like the prosecutor
in Zehrbach, the police officer King arguably carried the
"imprimatur of the Government."
The court in Zehrbach gave a specific instruction
immediately after the objection to disregard the
prosecutor’s comment, an instruction that the court
repeated just a short time later at the close of the
prosecutor’s argument. The court told the jurors to
disregard any personal opinion of counsel and to base their
decision solely on the evidence. In its final instructions, the
court cautioned the jury that the arguments of counsel
were not evidence and that they should not consider any
evidence that they were earlier instructed to disregard. This
extensive cautioning by the court sufficiently cured the
prosecutor’s error. 47 F.3d at 1267.
Here too, the jurors were told :
On the last page of the document there’s a statement
by this witness as to the total value. This witness used
the word "fraud." That’s his use of the word. This is not
the decision of you, ladies and gentlemen. It is your
duty and function here to determine whether or not the
government has proven beyond a reasonable doubt
whether or not this defendant has committed the
crimes charged, and the crimes charged have been
clearly stated to you. And they are bank fraud and
travel fraud. Is this understood? It’s his word, not your
decision. Understood?
18
The normal presumption is that a jury will follow the
Court’s instruction to disregard inadmissible evidence
inadvertently submitted to it, "unless there is an
overwhelming possibility that the jury will be unable to
follow the court’s instructions . . . and a strong likelihood
that the effect of the evidence would be devastating to the
defendant. . . ." Greer v. Miller, 483 U.S. 756, 766 n.8
(1987) (quotations omitted). Thus, in view of these
precedents, we believe that the trial judge’s strong and
unambiguous curative instructions rendered harmless the
inadvertent admission of the word "fraud" on the summary
of checks cashed, although offered by a government agent.5
Moreover, the admission of the word "fraud," seems
trivial in the broader context of the case. See Zehrbach, 47
F.3d at 1267. Officer King’s comment is couched within an
abundance of evidence of fraudulent conduct. The travel
fraud charge requires that the defendant willfully
participate in a scheme to defraud someone of property in
excess of $5,000 and that the defendant cause or induce
someone to travel in interstate commerce in furtherance of
the fraud. It is undisputed that Thomas induced Weygandt
to sign the checks under false pretenses and that she used
the checks for her own purposes, and thus was engaged in
a scheme to defraud Weygandt. Even if fraud upon the
bank was disputed at trial, thus making King’s use of the
word "fraud" with respect to the bank fraud charge a
debatable issue, there was no real issue as to whether there
was a scheme to defraud Weygandt. To prove a travel fraud
charge the Government must prove that the defendant
_________________________________________________________________
5. Moore v. Morton, 255 F.3d 95 (3d Cir. 2001), a criminal case cited by
Thomas, involved comments, made by the prosecutor, which were
actually held to be grounds for reversal despite strong curative
instructions. There however, the words amounted to an ugly racist
appeal, made deliberately by the prosecutor in an appeal to the jury’s
prejudices. The court noted the special repugnance of such rhetoric and
the importance of deterring prosecutorial misconduct in that vein when
committed willfully. The court found the trial so infected with unfairness
that it warranted a finding of prejudice, especially given that the bona
fide evidence for the prosecution was not sufficiently strong. Here the
evidence is far stronger for the prosecution’s case, and the erroneously
admitted evidence far less egregious.
19
induced a person to travel in interstate commerce in
furtherance of a scheme to defraud someone of over
$5,000. See 18 U.S.C. S 2314. Here, the evidence is strong
and clear that Thomas engaged in a scheme to defraud
Weygandt of over $5,000 and caused her to cross state
lines to visit banks in Delaware as part of that scheme.
Indeed, it is difficult to view Thomas’s conduct with respect
to Weygandt as other than fraud, and the inadvertent error
as harmless. See United States v. Copple, 24 F.3d 535, 546
(3d Cir. 1994).
V.
A.
We turn now to the appellant’s objections to her
sentence. Section 3B1.3 of the Sentencing Guidelines
provides in part that: "If the defendant abused a position of
public or private trust . . . in a manner that significantly
facilitated the commission or concealment of the offense,
increase by 2 levels." U.S.S.G. S 3B1.3. The rule requires a
two tier analysis. First the reviewing court must determine
whether a position of trust exists. The appellate court
reviews the district court’s ruling on whether a position of
trust exists de novo. The second question, whether that
position has been abused, is reviewed for clear error. United
States v. Iannone, 184 F.3d 214, 223 (3d Cir. 1999).
This Court recently set forth the factors for determining
a position of trust: (1) whether the position allows the
defendant to commit a difficult-to-detect wrong; (2) the
degree of authority which the position vests in the
defendant vis-a-vis the object of the wrongful act; and (3)
whether there has been reliance on the integrity of the
person occupying the position. 184 F.3d at 223.
There is ample evidence to show that Thomas indeed held
a position of trust with respect to Weygandt. Thomas
argues she was merely a health aide. The evidence,
however, shows that the real scope of her job was much
broader. There is evidence that Thomas opened Weygandt’s
mail for her without supervision and that she gave Thomas
authority to pay bills for her. These tasks clearly invested
20
Thomas with considerable discretion since Weygandt did
not monitor Thomas closely and appeared to rely on her
judgment and integrity. The wrong was difficult to detect
because Thomas was the person who filled in the amounts
and payees on the checks, and Weygandt did not
independently verify them. There was substantial reliance
on the good faith of Thomas, as there would be in any
relationship where financial matters are entrusted to
another. These facts satisfy all the elements of this Court’s
test.
The standard of review for abuse of a position of trust,
once it is established that the defendant was in such a
position, is clear error. Abuse of trust occurs where the
employer or vulnerable party relies on another’s integrity
for protection against the loss occasioned by the crime, and
where the trust aspect of the position made the commission
of the crime easier. 184 F.3d at 223-225. There is ample
evidence on which to draw such conclusions here. Clearly,
Thomas’s unique position enabled her to protect Weygandt
against financial theft because Weygandt signed checks at
Thomas’s request and on Thomas’s assurances as to their
purpose. Moreover, without Weygandt’s credulity and trust,
it appears likely that the checks would not have been
signed, and that Weygandt would not have accompanied
Thomas to the bank to vouch for the checks. Thus, to the
extent the sentencing enhancement for abuse of trust
applies to the travel fraud charge, the District Court
committed no error.
B.
Thomas claims that she is subject to a downward
sentencing adjustment for acceptance of responsibility,
pursuant to U.S.S.G. S 3E1.1. Although she might have had
a valid claim that the adjustment applied to her bank fraud
conviction, it does not bear at all on her travel fraud
sentence. Section 3E1.1 provides that, "If the defendant
clearly demonstrates acceptance of responsibility for his
offense, decrease the offense level by 2 levels." U.S.S.G.
S 3E1.1.
"[T]he District Court’s decision whether to grant the
adjustment is entitled to ‘great deference’ on review because
21
‘[t]he sentencing judge is in a unique position to evaluate a
defendant’s acceptance of responsibility." United States v.
Bennett, 161 F.3d 171, 196 (3d Cir. 1998) (quoting U.S.S.G.
S 3E1.1 cmt. (n.5)). Here, the District Court, in denying the
downward departure, relied chiefly on Thomas’s decision to
make the Government prove its case at trial. In rebuttal,
Thomas points to her pretrial confession to police
investigators, which the Government repeatedly referred to
in its arguments to the jury, and claims that the
Government’s factual case was essentially established by
virtue of the confession. She further argues that the
confession admits to the fundamental wrongdoing and that
proceeding to trial was intended not to establish her factual
innocence, but to determine whether her conduct fell within
the parameters of the bank fraud statute.
The Application Notes do permit a district court to
consider truthful admissions to the conduct for which
defendant is criminally responsible, so long as no relevant
conduct is not falsely or frivolously denied or contested.
However, in United States v. DeLeon-Rodriguez , 70 F.3d
764, 767 (3d Cir. 1995), this Court held that "a reduction
is generally not meant to apply to a defendant who puts the
government to its burden of proof at trial." The Application
Notes from the Guidelines add that only "[i]n rare situations
a defendant may clearly demonstrate an acceptance of
responsibility for his criminal conduct even though he
exercises his constitutional right to a trial. This may occur,
for example, where a defendant goes to trial to assert and
preserve issues that do not relate to factual guilt (e.g., to
make a constitutional challenge to a statute or a challenge
to the applicability of a statute to his conduct)." U.S.S.G.
S 3E1.1 cmt. (n.2).
Although there may have been a good faith challenge to
the applicability of the bank fraud statute to Thomas’s
conduct, there could have been no serious doubt as to the
applicability of the travel fraud statute. The Government
charged that Thomas had engaged in a scheme to defraud
Weygandt and, in furtherance of that scheme, had taken
Weygandt across state lines. These allegations were
indisputably covered by the travel fraud statute. Thus,
while there was no colorable legal defense to the travel
22
fraud charge, Thomas nonetheless forced the Government
to prove its case at trial. Thus, this is not the"rare
situation" where a defendant did accept guilt, despite
seeking a trial. See U.S.S.G. S 3E1.1 (cmt. (n.2). The
District Court committed no error in rejecting the
appellant’s challenge.
VI.
In summary, we hold that the relevant requirements
under the bank fraud statute are: a defendant must
execute, or attempt to execute, a scheme or artifice,
intended to victimize a federal bank or federally insured
bank by causing it an actual or potential loss of its own
funds. Where the scheme involves the mere withdrawal of
funds in the bank’s custody, the Government must show
that the withdrawal exposed the bank to some form of
liability as a result of the fraud. There was none here.
Accordingly, because there is no proof that Thomas
intended to victimize the banks or that the banks suffered
a loss, the Government’s case as to bank fraud fails as a
matter of law on Count I. The admission of the document
containing the word "fraud" is harmless error, and we will
affirm the District Court’s judgment as to Count II. We also
hold that the District Court correctly determined the
sentencing issues before it, to the extent those issues
pertained to the travel fraud count. The judgment of
conviction and sentence will be reversed on Count I and the
case remanded to the District Court for further proceedings
and resentencing consistent with this opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
23