On Bank

United States v. Gyanbaah, No. 10-2441-cr (2d Cir. November 8, 2012) (Winter, Lynch, Carney, CJJ)

The appellant here was part of a group that, for more than three years, stole names and other identifying information, then used it to file thousands of fraudulent tax returns in those victims’ names. The group expected that about half of the refunds would be approved; having sought $2.2 million in refunds, they actually received more than $500,000. When they received a refund check, one of the fraudsters would forge the payee’s signature and endorse the check over to a group member, who would deposit the check into a controlled bank account and withdraw the money. 

Gyanbaah, the particular appellant here, was linked to deposits at three different banks and nearly seventy fraudulent tax returns.  A jury convicted him of five counts, including, in relevant part, one count of bank fraud and one count of aggravated identity theft relating to that bank fraud. On appeal, the circuit agreed that the evidence was legally insufficient to support the bank fraud charge and that both that count and the related identity theft count should be reversed.

Despite the brazenness of the scheme, and the centrality of banks to its success, the conduct was not bank fraud because the government failed to prove Gynabaah’s “intent to victimize” the banks, that is "expose the banks to losses" by fraud. Its evidence on this point consisted only of the testimony of a Secret Service agent who explained only that when a bank “transmits funds to be collected” and it “comes back” as a counterfeit or fraudulent check, the bank “will no longer get those funds back” because “most of the time” the bank has “already given out the funds” to whoever withdrew them. But, “when pressed about specific losses suffered by banks as a result of [Gyanbaah’s] specific use of accounts,” the agent “could not confirm that such losses occurred.” And, while he believed that banks might have to bear the loss from accepting for deposit fraudulently obtained treasury checks, he was “unsure” if that was actually so.

On appeal, to defend the convictions, the government punted. It pointed to conversations between Gyanbaah and others indicating their desire to select banks that would be least likely to detect the scheme. But those conversations showed only an intent to avoid detection, not an intent to injure the banks.

The government also relied on the banks’ claimed exposure to losses, citing cases in which a defendant fraudulent caused a bank to pay out some of a depositor’s funds held in an account in that bank by, for example, cashing a forged check. But in that type of situation the bank’s “direct legal exposure to losses is sufficiently well known” that “a jury may infer that the defendant intended to expose the bank to the loss.” 

Here, by contrast, there was no “clear,” much less “well-known exposure of the banks to loss.”  Until alerted by the Treasury, the banks might well have been holders in due course with the risk of loss borne entirely by the Treasury. After all, here, in one such transaction, the treasury check was real, the signature of the final endorsee was the authorized signature for the account - even though it was fraudulently created by Gyanbaah - and was the only signature the bank needed to very to take the checks as a holder in due course. There was no evidence that the Treasury dishonored the checks or sought reimbursement from the banks. 

Judge Lynch filed an opinion concurring in the result, agreeing that it was dictated by the court’s precedent. He wrote separately to “express [his] view that those prior decisions are predicated on an unwarranted and unwise judicial injection of an offense element that” is not in the statute. Judge Lynch did not believe that “an intent to harm the bank is a required element of” bank fraud, and that it would be poor policy to include it. “The government cannot adequately protect federal insured banks from loss without being able to prosecute criminals who, while undertaking scheme to obtain property under the control of such banks, are ignorant or insouciant about whom they will harm.”  

Luggage Wreck

United States v. Leerdam, No. 07-1435-cr (2d Cir. July 18, 2008) (Jacobs, Straub, CJJ, Jones, DJ).

Here, the circuit reversed the convictions of two defendants, Andrea and Julio Lorenzo, who had been convicted in a drug importation and distribution conspiracy, finding that the evidence was legally insufficient.

Background

In July 2005, Francisca Leerdam was recruited to smuggle drugs out of the Dominican Republic. She made three successful trips to the Netherlands, then, in September of 2005, made her first trip to the United States. Her handlers gave her a suitcase, some money, a plane ticket and instructions. She made it through customs at JFK, and eventually met a confederate who took her suitcase and gave her a different one. Later, in Queens, the confederate met up with and spoke to Julio. Leerdam met Andrea, who asked her how it went. Andrea and Julio then took her to a hotel and paid for her room. The next day, Julio brought her $14,000 in a duffel bag and told her it was for her handler in the D.R. He drove her to the airport and she flew back, turned in the money and received $3,000.

One month later, she made another trip to New York with two suitcases given to her in the D.R.. This time, she was caught at JFK with 3.25 kilograms of cocaine. She agreed to cooperate by making recorded phone calls and a controlled delivery, assisted by an ICE agent, who posed as a cab driver. She called the phone number she had been given - with instructions to speak to Julio - and Andrea answered. Andrea said that Julio was sleeping, but that she had spoken to Leerdam’s handler, who said that Leerdam should come to their house. Leerdam and the “cab driver” brought the suitcases inside, while Andrea remarked, “so much work, huh?” then said that she had been told to take Leerdam to a hotel.

At this point, both women and Julio were arrested. Andrea made a post-arrest statement denying that she knew Leerdam, and asserting that she was doing a favor for her nephew by bringing Leerdam to a hotel. She also denied knowing what was in the suitcases. Later, she told agents that she had met Leerdam before, but did not know her name. Julio, in his statement, said he did a favor for his nephew by - referring to the September trip - by driving Leerdam around. He denied giving her any money.

The Appeal

The court reversed both defendants’ convictions on the ground that there was insufficient evidence that they entered into the conspiracy with the specific intent to commit the offenses that were its objects or that they had the requisite knowledge.

For Julio, the court held that, while there was “ample” evidence of the existence of the conspiracy and of his presence and participation in events that furthered it, there was insufficient evidence that he did so knowingly and with the intent to further a cocaine smuggling and distribution conspiracy. For the September trip, there was no evidence of the contents of the suitcase, or that Julio know what was in it. Given this, and his “complete lack of participation” in the October events, even the $14,000 he gave to Leerdam in September was not enough. While “indicative of participation in illegal behavior,” it was consistent with a wide variety of offenses, and was by itself insufficient to prove his specific intent to participate in the drug conspiracy. The court also rejected the argument that the fact that Leerdam had been told to call Julio during the October trip rendered the evidence sufficient. The request was not fulfilled, and Julio was dormant during this entire episode. Finally, the court rejected the claim that Julio’s false exculpatory statement rendered the evidence sufficient. The totality of the facts, in the aggregate, was not enough to sustain his conviction.

For Andrea, the evidence was “even more sparse.” Indeed, the court issued an order reversing her conviction one day after oral argument. The evidence against her “considered in the aggregate,” supported “at most” an inference that she “knew that she was assisting suspicious behavior.” But it was also consistent with “providing hospitality to her nephew’s girlfriend and regretting” it.

GET YOUR STASH HOUSE IN ORDER

United States v. Wilson, Docket No. 05-5985-cr (2d Cir. September 24, 2007) (Jacobs, Katzmann, Hall, CJJ) (per curiam)

This short decision disposes of a sufficiency claim that has not yet arisen in this Circuit relating to “stash house” prosecutions under 21 U.S.C. § 856(a)(2).

Wilson shared two apartments with a drug dealer - the tools of his trade were in open view all over the place. She argued that the evidence was legally insufficient because the government did not prove that she herself intended that the premises would be used for an unlawful purpose.

The Circuit made short work of this. The phrase “for the purpose” in § 856(a)(2) refers to the purpose of the person who is permitted to engage in drug activity in the premise, and not she who permits him. By contrast, § 856 (a)(1) makes it a crime for the person controlling the premises to have such a purpose. Thus, under Wilson’s reading of the law the two sections would proscribe the same conduct.

Here, the government only needed to prove that Wilson knew that her residence was being used for drug trafficking, and it did so.