U.S. Supreme Court Issues Bank Fraud Decision


On June 23, 2014, the U.S. Supreme Court issued its decision in Laughlin v. United States which defined what type of fraudulent activity is punishable under the federal bank fraud statute. Posing as a Mormon missionary, Kevin Loughrin went door-to-door in a Salt Lake City neighborhood and rummaged through mailboxes looking for checks. He then altered those checks and used them to buy merchandise from Target which he later returned in exchange for cash. When he was caught, Mr. Loughrin was prosecuted (and convicted) in federal court for bank fraud. He received a sentence that was higher than what he likely would have received if convicted in state court.

The federal bank fraud statute, 18 U.S.C. § 1344, criminalizes both schemes to directly defraud banks and schemes to fraudulently obtain money or property owned by or under the control of a bank. Mr. Loughrin argued that he did not violate this statute because he only intended to defraud Target, not the banks on which the altered checks were drawn. Mr. Loughrin further suggested that federal criminal law should not be interpreted so broadly as to cover run-of-the-mill schemes and minor frauds which are traditional prosecuted under state law.

Despite the fraudster’s concern for federalism, the Supreme Court voted unanimously that federal prosecutors did not need to prove that Mr. Loughrin actually intended to defraud a bank in order to be convicted of bank fraud. Rather, a conviction under the federal bank fraud statute only requires proof that a defendant intended to obtain bank property (such as funds from a checking account) by means of a false representation (such as a forged check).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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