The increasing federalization of our criminal justice system, with its prosecutorial overcharging, unreasonable mandatory minimum sentences and harsh sentencing guidelines, demonstrates not only a distrust, but a disdain, for state criminal justice systems.
Writing in an April 2014 edition of the JURIST, two attorneys with the Los Angeles-based law firm of Munger, Tolles & Olson LLP, Daniel B. Levin and Victoria A. Degtyareva, wrote a guest column about Kevin Loughrin who used six stolen and altered checks to steal more than $1,000 from a Salt Lake City Target store.
In 2009, Loughrin pretended to be a Mormon missionary going door-to-door but was actually rifling through residential mailboxes for checks. It was not a complicated scheme: Loughrin sometimes bleached, washed, ironed and dried the checks; other times, he simply crossed out the name of the original payee and substituted another.
Clearly, Loughrin was not a major thief; on the Richter scale of petty thievery, it would have been a struggle for him to measure a 0.1000. It took Loughrin several months before he could steal the six checks he passed off at Target. He made the checks out in amounts up to $250. He would enter the Target store, select some merchandise, and present the cashier with an altered check. He would then take the merchandise outside the store, turn around, and reenter the store whereupon he exchanged the merchandise for cash.
Astonishingly, the Federal Government elected to get involved in a case that should have been left up to state prosecutors. Instead, Federal prosecutors sought, and secured, six counts of Federal bank fraud under Section 1344 of Title 18, United States Code, and two counts of aggravated identity theft under Section 1028A of Title 18. The indictments were, at a minimum, an outrageous example of Federal prosecutorial overreach.
“There was no evidence that Loughrin intended to defraud a bank,” Levin and Degtyareva wrote. “On the contrary, the evidence at trial showed that most of the checks were intercepted by Target’s staff and were never been submitted to a bank.”
The two attorneys pointed to a 2010 study by the Heritage Foundation and the National Association of Criminal Defense Lawyers that found the number of criminal offenses in the United States Code increased from 3,000 in the early 1980s to 4,450 in 2008; and that the number of defendants prosecuted in federal courts increased from 67,000 in 1996 to 102,931 in 2011.
Despite the fact that the Loughrin case should have been prosecuted at the state level, the case eventually worked its way all the way to the U.S. Supreme Court. The issue before the court was whether the Government must prove that a defendant charged with bank fraud has a specific intent to actually defraud the bank.
There are several indisputable facts in the Loughrin case. Each of the six checks presented at Target were drawn on a federally insured bank account. Three of the checks were identified as fraudulent by Target staff and were not even submitted to the banks for payment. The other three checks were deposited with a bank. The bank refused payment on one after the account holder notified the bank that she had seen a man steal her mail. Target received payment on the remaining two checks, apparently leaving a loss amount of under $500.00.
At the conclusion of his federal trial, the judge instructed the jury that by offering the fraudulent checks to Target, Loughrin had “knowingly executed or attempted to execute a scheme or artifice to obtain money or property from the [banks on which the checks were drawn] by means of false or fraudulent pretenses, representations, or promises.” Loughrin sought but was denied the additional instruction that the jury had to find that he actually had the “intent to defraud a financial institution.” The judge refused to give that instruction, and the Tenth Circuit Court of Appeals agreed with the trial judge, finding that while the bank fraud statute casts “a wide net for bank fraud liability, the plain language of the statute does not require the Government to prove intent to defraud.
All the parties involved in the litigation before the Supreme Court agreed on one thing: the bank fraud statute has two essential elements. In its June 2014 decision, the court discussed those two elements:
“First, the clause requires that the defendant intend ‘to obtain any of the moneys . . . or other property owned by, or under the custody or control of, a financial institution.’ And second, the clause requires that the envisioned result—i.e., the obtaining of bank property—occur ‘by means of false or fraudulent pretenses, representations, or promises.’ Loughrin does not contest the jury instructions on either of those two elements. Nor does he properly challenge the sufficiency of the evidence supporting them here.
“The single question presented is whether the Government must prove yet another element: that the defendant intended to defraud a bank. As Loughrin describes it, that element would compel the Government to show not just that a defendant intended to obtain bank property (as the jury here found), but also that he specifically intended to deceive a bank. And that difference, Loughrin claims, would have mattered in this case, because his intent to deceive ran only to Target, and not to any of the banks on which his altered checks were drawn.
“But the text of §1344(2) precludes Loughrin’s argument. That clause focuses, first, on the scheme’s goal (obtaining bank property) and, second, on the scheme’s means (a false representation) … But nothing in the clause additionally demands that a defendant have a specific intent to deceive a bank.
And indeed, imposing that requirement would prevent §1344(2) from applying to a host of cases falling within its clear terms. In particular, the clause covers property ‘owned by’ the bank but in someone else’s custody and control (say, a home that the bank entrusted to a real estate company after foreclosure); thus, a person violates §1344(2)’s plain text by deceiving a non-bank custodian into giving up bank property that it holds. Yet under Loughrin’s view, the clause would not apply to such a case except in the (presumably rare) circumstance in which the fraudster’s intent to deceive extended beyond the custodian to the bank itself. His proposed inquiry would thus function as an extra-textual limit on the clause’s compass.
“And Loughrin’s construction of §1344(2) becomes yet more untenable in light of the rest of the bank fraud statute. That is because the first clause of §1344, as all agree, includes the requirement that a defendant intend to ‘defraud a financial institution’; indeed, that is §1344(1)’s whole sum and substance….”
As Levin and Degtyareva pointed out, this position taken by the Court defies the historical purpose of Federal criminal statutes; namely, those “limited to a small subset of crimes that affected uniquely federal interests such as treason or bribery of a federal official”
That is not the rule today. Federal law is now being increasingly used by Federal prosecutors to turn state and local crimes into serious major federal crimes. The theft and misuse of six stolen checks should not be a federal crime, much less a Federal bank fraud offense carrying a maximum penalty of 30 years and a mandatory consecutive term for aggravated identity theft.
The Framers certainly did not intend to create either a Federal police force or a Federal criminal justice system.
The Loughrin case raised much more than a semantic issue concerning a criminal statute. It actually raises the issue of the propriety of the Federal government turning a “bad checks” into a major Federal offense. Loughrin received a 36-month sentence followed by 60 months of supervised release, a stiff sentence for passing a half dozen bad checks.