Shaw v. United States

PETITIONER:Lawrence Eugene Shaw
RESPONDENT:United States
LOCATION: U.S District Court for the Central District of California, Western Division

DOCKET NO.: 15-5991
DECIDED BY:
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: US ()
GRANTED: Apr 25, 2016
ARGUED: Oct 04, 2016

ADVOCATES:
Anthony A. Yang – for respondent
Koren L. Bell – for petitioner

Facts of the case

Stanley Hsu, a Taiwanese business man, opened a Bank of America bank account while working in the United States. When he returned to Taiwan, he arranged for the daughter of one of his employees to receive his mail and forward it to him in Taiwan. Lawrence Eugene Shaw lived with the daughter and regularly checked her mail. When the Bank of America statements arrived for Hsu’s account, Shaw concocted a scheme in which he opened a PayPal account under Stanley Hsu’s name and used it to convince banks that he was Hsu for the purpose of transferring money from Hsu’s accounts to the PayPal account and from there to an account that Shaw controlled. Using this scheme, Shaw was able to transfer approximately $307,000 of Hsu’s money to himself before the fraud was discovered. Bank of America returned approximately $131,000 to Hsu, and PayPal returned approximately $106,000. Hsu lost about $170,000 by not notifying the banks within 60 days of the fraudulent transactions, as standard banking procedures require.

The government charged Shaw with violating the Bank Fraud Act of 1984, which criminalizes schemes “to defraud a financial institution.” Shaw requested a jury instruction that stated that the government had to prove that he intended not only to defraud the bank but also that he intended to target the bank as the principal financial victim. The district court refused to give the instruction and determined that the language of the Act required that the government prove only that the defendant intended to deceive the bank, not that he also intended the bank to bear the loss that resulted from the fraud. The jury convicted Shaw of 14 counts of bank fraud under the Act, and the U.S. Court of Appeals for the Ninth Circuit affirmed.

Question

In order to convict a defendant of defrauding a financial institution under the Bank Fraud Act of 1984, does the government have to prove not only that the defendant had an intent to deceive, but also that the target of that deception was a bank?

John G. Roberts, Jr.:

We’ll hear argument next in Case 15991, Shaw v. United States. Ms. Bell.

Koren L. Bell:

Thank you, Mr. Chief Justice, and may it please the Court: Clause (1) of the Federal Bank Fraud Statute premises culpability on intent to defraud a financial institution, and this case concerns what that element entails.

The settled meaning of clause (1)’s text based on a century of this Court’s precedent, its fraud precedent, makes clear that intent to defraud a bank requires intent both to deceive the bank and wrong the bank in its own property rights.

Intent to wrong a bank’s property rights, which includes its own possessory rights, in bank-held property means intent to cause the bank, not the customer, to bear the proper loss of a fraud scheme.

And in this sense —

Sonia Sotomayor:

I’m sorry.

Possessory right means I own something.

I’m holding it.

In most criminal charges for larceny, the issue is whether I have a possessory right, regardless of what I want to do with this property, over you who’s taken it from me.

So where do you get the next step that possessory right means I have to lose something of value or that I’m going to ultimately bear the loss? Isn’t the loss merely the loss of the possessory right?

Koren L. Bell:

Your Honor, the statute turns on intent, and were the government to prove the defendant’s intent to deprive of you of your possessory right, and that would be sufficient.

And where that comes from is from this Court’s settled fraud precedent.

Going back a hundred years, the Court has interpreted the term “defraud” to mean property lost to the victim.

And we see that —

Stephen G. Breyer:

So if you’re insured and the — or at least the defendant believes he’s insured, it isn’t theft?

Koren L. Bell:

If the defendant believes that the bank is insured and therefore that another party will bear the loss?

Stephen G. Breyer:

Even Kardashian’s thief, if there is one, believes that all that jewelry is insured. Indeed over insured.

So it’s not theft?

Koren L. Bell:

Well, so it would depend on the language of the statute.

Stephen G. Breyer:

No, it says defraud.

She lied.

He says I’m knocking on the door — you know, I’ll go as far as you want.

But I don’t see that that has anything to do with it.

You mean if he — if he defrauds him out of the money, he defrauds her out of the jewelry, says here I a.m., your local jewelry cleaner.

Gets the jewelry.

Wouldn’t you think that was fraud? Even if she’s insured.

Even if he thinks she’s triple insured.

Even if he thinks that, in fact, this isn’t even her jewelry, that it was just loaned her on the occasion by a good friend, the necklace.

Koren L. Bell:

It would depend on whether the statute in that case required the intent to defraud —

Stephen G. Breyer:

What the statute says is defraud.

Koren L. Bell:

Defraud.

In that case it’s much like the mail and wire fraud statutes which do not specify a required victim for the fraud scheme, and therefore provided the government could prove the two undisputed components of the term “defraud” which come from —

Stephen G. Breyer:

I’m not asking you to repeat it.

I’m asking you, if the local person comes to the door and says, dear Miss Kardashian, I a.m. your local jewelry cleaner.

Please give me your jewelry. She does.

And that’s not fraud.

He wanted to get the jewelry.

He tried to get the — he also believed that the friend had just loaned it for the evening, that she’s triple insured, that she won’t even lose any money because the publicity will be worth it.

Okay?

Koren L. Bell:

Right.

And that —

Stephen G. Breyer:

Now, my question is: There’s the statute.

I would have always thought from first year of law school, criminal law, that that was fraud, but perhaps I was wrong.

So I would like you to explain it.

Koren L. Bell:

Yes, Your Honor.

That would be a scheme to defraud the insurer.

If the scheme — if the — and in this case of the mail and wire fraud statutes which penalize a scheme to defraud anyone, for example, and provide heightened penalties for schemes that defraud anyone and happen to affect the bank, then, yes, that would — would satisfy the statute.

But if the statute specified a particular victim as clause (1) does here, and clause (1) says the intended victim must be the bank, not the customer. And so our argument depends on that — on — on two steps based on this Court’s long-standing fraud precedent.

The first is how we define defraud.

But the second is the presence of the direct object there.

In the example that Your Honor posited, there — there was no required object of the fraud scheme, and therefore at the very least it would certainly constitute a scheme to obtain money or property by means of false pretenses.

John G. Roberts, Jr.:

You get — you get mired in some very abstract concepts of property rights. Yes, someone is insured, but here if they keep getting their property stolen, their insurance rates go up. Here, okay, it wasn’t that if you — correct, it wasn’t the bank’s own property, but it’s somebody else’s property that they use in making loans.

And, again, they will have less money to make loans if the property is — is being taken. Now, does your case turn on what the defendant knows even if that’s not right? I mean, the argument may as well — people commonly think you put your money in the bank, it’s your money, and they’ll give it back, but of course it’s loaned out by the bank. But if the defendant really thinks I’m not — I don’t want to take anything from the bank.

I’m taking this from two — and he’s wrong, is — is he off the hook?

Koren L. Bell:

Yes, Your Honor.

So first of all, the standard here is not what he knows but what he intends, which this Court, going back to the Derlin case in 1896, has equated with purpose, which makes sense because we’re talking about a scheme which is a plan with a purpose.

And precisely for that reason this particular liability scheme avoids the effect-based technicalities that the government complains of, because it doesn’t matter whether the bank in fact has possessory interest or whether the insurer is going to in fact bear the loss.

The only thing that matters is as Your Honor says what the defendant intends, what his purpose is in devising this scheme.

John G. Roberts, Jr.:

Well, is that making — is that ignorance of the law being the defense because the law — he thinks the bank — the bank doesn’t have any property interest at all, but in fact the bank has the property interest as either a bailee or bailor or — I forget which one it is — and the bank has the property interest because it actually uses the money in its own effect, but he’s wrong about that legal question of property.

So his ignorance of the law is a defense?

Koren L. Bell:

Your Honor, it wouldn’t be ignorance of the law.

This — there’s nothing anomalous about an intent-based liability scheme.

And the answer is that particular fraud scheme would be punished under clause (2) of this statute.

It’s not that it’s not bank fraud —

Ruth Bader Ginsburg:

You mentioned the sub 2. Do you recognize, do you concede that Shaw could have been charged and convicted under the obtaining property owned by or under the custody or control of a financial institution if the — if the government had charged that instead of defrauding a financial institution, could Shaw have been found guilty?

Koren L. Bell:

Absolutely, Your Honor.

That was the appropriate charge in this case.

And the reason why the bank fraud statute works as a whole exactly as Congress intended based on this intent-based liability scheme is because the schemes that arise in the federal circuits sort neatly into clause (1), clause (2), or both depending on the design of the scheme.

So the design is in most every practical case in every real-world example going to reflect the intent.

Anthony M. Kennedy:

Well, design here, the intent here is to harm whoever has a lawful possessory interest.

Koren L. Bell:

Your Honor, the intent required under clause (1) — and that’s quite clear because it specifies the bank — is to harm the bank in its property right.

Anthony M. Kennedy:

But it has a possessory interest —

Koren L. Bell:

And — and certainty if the —

Anthony M. Kennedy:

And that possessory interest is harmed.

It’s the harm to the interest, not the harm to the entity.

Koren L. Bell:

It — it — in fact it may be harmed, although in this case, of course this is an example where the banks never suffered any loss, and there was no dispute on that point.

But certainly, Your Honor, it’s true that the —

Anthony M. Kennedy:

But it was — was it not a harm to the possessory interest?

Koren L. Bell:

Yes, Your Honor.

Insofar as the bank was deprived for a momentary period of those funds in its coffers, yes, in fact it was deprived.

Elena Kagan:

So, Ms. Bell, I guess — I guess what Justice Kennedy is suggesting and maybe I’m confused about the same thing, it now seems to me that there’s no difference between your view and the government’s view. So, Mr. Yang, I’m putting you on notice that this is a question to you too, because both of you are saying, look, there needs to be an intent to deceive the bank.

Koren L. Bell:

Correct.

Elena Kagan:

And there needs to be an intent to deprive the bank of some form of property interest, but with the recognition that property interests includes possessory interests, as well as more classic ownership interests.

And you agree with that.

Koren L. Bell:

Correct, Your Honor.

Elena Kagan:

I’m going to think, and Mr. Yang you’ll tell me, that Mr. Yang would agree with that too.

So what are we fighting about?

Koren L. Bell:

Correct, Your Honor.

Elena Kagan:

Then it’s just — Mr. Yang would say, well, look, a bank has a possessory interest in assets that are part of its depositor’s account, and so, you know, that’s — whether you target the depositor’s account or you target something else, you’re still manifesting the same intent to deprive the bank of a property including possessory interest.

Koren L. Bell:

Right.

Koren L. Bell:

I understand, Your Honor. I think there are two issues here.

The first one is whether an intent to deceive is sufficient for an intent to defraud.

And the Ninth Circuit approved of jury instructions that permitted a conviction on that basis. That alone —

Elena Kagan:

That seems right to me.

I want to point, you know, that you might say all of that is right and that the government and you agree, and what you really disagree on is whether these instructions reflected that correct understanding of the law.

And that seems fair to me.

And we should talk about the instructions.

Koren L. Bell:

Yes.

Elena Kagan:

But it seems to me that the understanding of the law is now you are in perfect harmony.

Koren L. Bell:

It — it — it may be the case, but let me explain.

I think that on the — the second prong, in terms of if intent to deceive requires more — I’m sorry — if intent to defraud requires more than just intend to deceive, what is that second piece? And there we get to what it means to wrong a bank and its property rights.

Stephen G. Breyer:

What it says in the instructions is, “Intent to deceive, cheat, or deprive a financial institution of something of value.”

Koren L. Bell:

Correct, Your Honor.

And that would —

Stephen G. Breyer:

So what’s the problem?

Koren L. Bell:

That would — because it’s worded in a disjunctive, in other words, or, it permits a conviction on the basis —

Stephen G. Breyer:

So the “or” goes between “to deceive, cheat, or deprive.”

Koren L. Bell:

Correct.

And so it was —

Stephen G. Breyer:

But what you have to cheat, deceive, or deprive them of, is something of value.

Koren L. Bell:

Correct, Your Honor —

Stephen G. Breyer:

And a possessory interest is something of value.

So what are you arguing about?

Koren L. Bell:

Your Honor, two things.

First of all, the — I would disagree, respectfully, with the Court’s interpretation of — of the scheme to defraud instruction.

I do not think that the “deprive the bank of something of value” is plausibly read to modify “deceive” and “cheat.”

Stephen G. Breyer:

In other words, you think it means “deceive, cheat, or deprive”?

Koren L. Bell:

Correct, your Honor.

Stephen G. Breyer:

But not of anything.

It doesn’t say anything, what it seeks to deprive them of. And then it comes out of the blue and says —

Elena Kagan:

I think it —

Stephen G. Breyer:

— someone intends a financial institution of value.

That’s what you think it means.

Elena Kagan:

But it —

Stephen G. Breyer:

Okay.

Did you make that argument in the court below?

Koren L. Bell:

Yes, Your Honor.

That was precisely the argument —

Stephen G. Breyer:

What page? Do you have it here, by chance, what page you made that particular argument?

Koren L. Bell:

Sure, Your Honor.

I get that on rebuttal.

I don’t want to take the Court’s time now, but let — let me be clear: Here — we’re here because the — the scheme to defraud requires the intent to defraud, and that — that’s really undisputed that that’s the element. The intent to defraud instruction simply required the intent to deceive or cheat.

Sonia Sotomayor:

My colleague Justice Alito has written extensively on this issue of intent versus knowledge.

Koren L. Bell:

Yes, Your Honor.

Sonia Sotomayor:

All right.

Why don’t we just, instead of using intent —

Koren L. Bell:

Yes.

Sonia Sotomayor:

All right.

You can deceive someone without taking property, right?

Koren L. Bell:

Certainly.

Yes.

Sonia Sotomayor:

All right.

Someone can open up an account in a false name.

They’ve deceived the bank, but it’s not to cheat the bank of anything its holding.

But it’s to the cheat the wife who he wants to hide money from, right?

Koren L. Bell:

Okay.

Yes.

Sonia Sotomayor:

So nothing of value has been taken.

You can cheat the bank in that way, too, out of moving something somewhere, but not to take it. Okay?

Koren L. Bell:

Yes.

Sonia Sotomayor:

And you can deprive someone of property without deceiving or cheating them. You can rob them, right?

Koren L. Bell:

Correct.

Sonia Sotomayor:

All right.

So I thought — and this is what Justice Kagan was getting to — it has to be that you deceive or cheat and deprive someone of property, correct?

Koren L. Bell:

Your Honor, the cheat, I think, is synonymous with the concept of —

Sonia Sotomayor:

Of defrauding.

Koren L. Bell:

— of — of — well, defrauding. Your Honor is correct.

Sonia Sotomayor:

You — you defraud someone by deception.

Koren L. Bell:

Deception in order to cause them to bear the property loss —

Sonia Sotomayor:

That’s why you say it’s two different elements.

Koren L. Bell:

They’re two — no.

I’m sorry. They’re not two different elements.

It’s one element. It’s the intent to defraud. But there are two components of defraud, and the government doesn’t dispute that.

That comes from the Hammerschmidt case in —

Sonia Sotomayor:

So far, I perfectly understand your point.

Koren L. Bell:

Thank you.

Yes.

Sonia Sotomayor:

That the defraud element has two prongs to it; deception, for the lack of — deception is one prong and deprivation is the other. You’re taking the money by — or the possessory interest by deception. And you’re saying that by using the disjunctive, the “or,” the jury could have convicted merely for deceiving the bank, but didn’t find that they deceived “and” deprived the bank of a possessory interest, correct?

Koren L. Bell:

That’s exactly right, Your Honor. That’s exactly right.

Sonia Sotomayor:

Now, Justice Breyer has asked the operative question.

Koren L. Bell:

Yes.

Sonia Sotomayor:

And — and it’s what confused me throughout, both in the discussions below and here. At first, I thought this case was only about reading your brief about whether the deprivation had to be of something the bank owned.

Koren L. Bell:

Yes.

Sonia Sotomayor:

As opposed to had a possessory interest in.

And Justice Kagan rightly says you seem to have backed off from that claim.

You seem to be saying “owned” can mean merely a possessory interest.

Is that correct, now?

Koren L. Bell:

Your Honor, we don’t see that as a different formulation, and let me explain why, cause I certainly understand the confusion. The — the standard is that comes from this Court’s fraud precedent, the mail and wire fraud precedent that everybody agrees is the operative body of law is the intent to wrong the bank in its property rights.

That’s —

Anthony M. Kennedy:

In its what?

Koren L. Bell:

In its property rights.

In its property rights.

In its own property rights.

Elena Kagan:

Which you — which you now include can include possessory interests.

Koren L. Bell:

Correctly.

And we certainly never meant to — to disavow that.

The issue is what does that mean in practice? And in practice what that means is the intent to cause the bank, and not the customer, to — to bear the property loss of the scheme.

Samuel A. Alito, Jr.:

No.

That’s not what it means.

Elena Kagan:

No.

Samuel A. Alito, Jr.:

That’s not what it means. And maybe something more is required.

Maybe it has to be deprive of an ownership interest or cause a loss, but depriving of a possessory interest is not the same as causing a loss to the bank.

Koren L. Bell:

Well, let me explain how I mean it.

I mean it in the sense that, as this Court has recognized, when you intend a deprivation of a victim, you — you also — the mirror image of that is the intended acquisition.

And that’s where we’re getting the idea that when you intend — if a defendant were — and I have never seen a case in my personal practice, or anywhere in the Federal circuits, that approaches anything like an intent to actually deprive the bank of its possessory interest. What defendants think about when they posit these schemes to get customer deposits is to either — is either that they are taking the customer’s money, or they are taking the bank’s money, insofar as the bank is going to suffer the loss, or the customer is going to suffer the loss.

Elena Kagan:

Most of them don’t care.

Anthony M. Kennedy:

You want us to write an opinion — you want us to write an opinion and say it’s perfectly lawful under this statute, section (1), to knowingly deprive someone of a possessory interest by deception?

Koren L. Bell:

Well, Your Honor, I think —

Anthony M. Kennedy:

You want us to write that?

Koren L. Bell:

No, Your Honor.

Insofar as first of all, the standard would be the intent, right? So we’re talking about the — the intent, which is different than knowledge —

Anthony M. Kennedy:

Intend to deprive someone by deception of a possessory interest is proper.

You need something more.

That’s what you — that’s what you are saying?

Koren L. Bell:

The intent to deceive the bank and deprive the bank of a possessory interest would suffice.

That does not come up in practice, however. The property —

Ruth Bader Ginsburg:

Your point is you have to have the intent to the hurt the — the bank —

Koren L. Bell:

Exactly, Your — exactly, Your Honor.

Ruth Bader Ginsburg:

— not the customer.

Koren L. Bell:

That is exactly right.

Ruth Bader Ginsburg:

So if you — if the customer will end up bearing the loss, then you say one doesn’t apply. What does one cover, in your view, other than check hiding?

Koren L. Bell:

Yes, Your Honor.

It — it applies to — it applies to any scheme designed to cause the bank — that — that targets the bank as the financial victim of the fraud by means of concealment, omission, or any other kind of —

Stephen G. Breyer:

By watching the movies, most — I’d be afraid, in this case, that we’re going to write something of five pages that nobody’s going to understand, with the simple thing, Jessie James goes up to the bank, says, your money or your life.

He sees behind the teller is a drawer, and you know he’s — that in that drawer, the last five customers have given him some money.

That’s the money he wants. It doesn’t matter whether, in fact, the bank is going to put that money in Joe Smith’s account, or whether the bank has something called a possessory interest or something else.

And in fact, if Jessie James’ brother comes up and says, Jessie James is on the way, give me the money, it should be the same result. Now that’s very simple-minded, but — and it’s built in me by the movies, but if, in fact, you have a different approach, I would like to know where in the law that different approach is, and why it is, and — and how this does — how this is — I’m afraid, in other words, of confusion. You unconfuse me, please.

Koren L. Bell:

Yes, Your Honor.

And when Your — when Your Honor says, if I have a different approach in terms of where our — where our construction of clause (1) comes from in — in the Court’s precedents? Is that the question?

Stephen G. Breyer:

Well, my question is, why hasn’t Jessie James or his brother committed a crime — the brother, probably, because he’s lied and says Jessie James is on the way, and whether the money behind the desk was put there, to everyone’s knowledge, by the depositors, or whether the money happens to have been there for 50 years by the bank — put in by the bank’s founder, makes no difference to this statute.

And I want to know why it should, or anything else you want to say about that.

Koren L. Bell:

So that case where there’s some ambiguity, and this gets back to Your Honor’s question, Justice Ginsburg, that case would be best charged under clause (2), which covers schemes that intend to victimize either the customer or the bank provided the requisite means of a false statement. So whenever there’s any ambiguity in terms of what as a practical matter does this cover, clause (2) will cover the customer scheme in Loughrin — I’m sorry, the altered-check scheme in Loughrin, and it will cover the deposit scheme here. It will cover Your Honor’s hypothetical, provided the intent’s also to deceive and it’s not just plain, let’s say, bank larceny which is covered under another statute and focuses on the effect of the conduct. And clause (1) then is reserved for other cases like check kiting, which was a major, major impetus for this statute’s enactment, and Congress knew at the time, based on this Court’s 1982 decision in Williams that check kiting was not going to be covered under clause (2)

It’s one of the most pervasive forms of bank fraud. So that’s not a minor role that clause (1) serves.

But in addition, it’s going to serve the loan fraud and the bank embezzlement types of cases no affirmative false statement.

Sonia Sotomayor:

All right.

So if we disagree with you, if we were to say that this subsection 1 means that you are targeting property that — depriving any bank of property in which it has a possessory interest —

Koren L. Bell:

Yes.

Sonia Sotomayor:

— and we say you don’t have to prove the bank is going to lose anything of value, that it’s going to be reimbursed by insurance or that ultimately the customer is going to receive — bear the loss, so long as you have defrauded the bank, some deception to the bank, and deprived it of some possessory interest, whether it bears the loss or not, if that’s how we rule, do you lose this case?

Koren L. Bell:

No, Your Honor, because it comes down to the requisite intent and purpose.

Sonia Sotomayor:

We’re disagreeing with you.

That’s how we’re going to say what it means.

Koren L. Bell:

Yes, I understand.

And I —

Sonia Sotomayor:

All right.

Do you think —

Elena Kagan:

Ms. Bell, I think your answer is, no, Your Honor, because the instructions don’t reflect your understanding of the law.

Koren L. Bell:

We certainly win on that basis. So reversal is required because the intent to defraud means more than just —

Elena Kagan:

I’m not saying it does.

I think it’s a hard question as to whether the instructions do or don’t, but it does seem to me you have an argument about the instructions.

Koren L. Bell:

Right.

Koren L. Bell:

That’s — that’s correct, and I think we also, though, would not lose under that second question about even if the Court construes — which we agree with — but the intent must be to harm the bank and its property rights.

It’s the economic injury, and that is reflected in every single fraud decision we see from this Court starting with —

Ruth Bader Ginsburg:

But if the Court disagrees with you about that, if the Court thinks that someone doesn’t require that you intend to cause the bank financial harm, only that you intend to deprive the bank of something of value, if that’s — by deception —

Koren L. Bell:

Yes.

Ruth Bader Ginsburg:

— should the Ninth Circuit be affirmed?

Koren L. Bell:

No, but —

Ruth Bader Ginsburg:

Should we reject your theory that you have to intend to cause the bank a financial loss?

Koren L. Bell:

No, Your Honor, and let me be clear because I understand that it is confusing with the different theories, but our — those two formulations that Your Honor articulated are one in the same in our view. In other words, the intent to wrong a bank in its property rights is the second component of defraud, but what does that mean in practice? That’s not nonsensical for a jury.

What that means is that the bank must bear the loss of the scheme.

And so —

Samuel A. Alito, Jr.:

That’s not what it means.

Stephen G. Breyer:

You have a lot of cases, and I think the model penal code started it, where you have the word “intent” in a statute normally, not always, but normally it covers both purpose and knowledge.

So that if you try to murder the queen by blowing up the carriage, a famous example, and that would lead to the death of the footman, even though you love the footman, you are still guilty of killing the footman through murder.

Okay.

That’s the famous example.

Koren L. Bell:

Yes, Your Honor.

Stephen G. Breyer:

So intent includes, unless there’s some contrary which you could argue, to the both.

The statute that can — the instruction they have to show, scheme to defraud, means that the person intends, which means he has knowledge that, as I take it, to deceive, cheat or deprive.

That’s where the “or” is, deceive, cheat or deprive a financial institution of something of value. So I looked at that and I thought, what’s the problem? What’s the problem? That’s what I want you to explain.

Koren L. Bell:

Yes, Your Honor.

Stephen G. Breyer:

It’s not saying intends to cheat or deceive somebody, and then a separate thing, or deprive the financial institution of value.

It’s intend to deceive, cheat or deprive.

Who? A financial institution.

Of what? Of something of value. So what is wrong with that instruction? That’s — that’s what I need explanation.

Koren L. Bell:

Yes, Your Honor, and I’ll answer that, and then if I may reserve the remainder of my time. That — the problem with that instruction is that it allows for a conviction on the basis of a scheme to deceive the bank alone. Now even if Your Honor disagrees with me, as it seems that you might, that problem is compounded by the intent to defraud instruction, which plainly it does not include the something of value reference.

It plainly allows for a conviction on the basis of an intent to deceive alone.

That flies in the face of this Court’s fraud precedent, and we see this going from Hammerschmidt, in which the Court equated the idea of wronging a bank in its property rights, to pecuniary or property loss. We see it two years later in the Cone decision where the Court made it clear that an intent to take something from the United States, in that case the statute designated the United States, that that was insufficient to simply intend to take something from the United States custody without showing the intent to cause pecuniary and property loss.

And we see that all the way through to Pasquantino, the 2005 decision about economic injury, through to Skilling, where the Court says traditional fraud involves the loss of property. So applying the meaning, the — really the undisputed meaning of defraud, to the undisputed intent to defraud element here, where clause (1) specifies the bank, that, Your Honor, is what is wrong with the instructions that allow for a conviction on the basis of a mere intent to deceive the bank. And if I may reserve the remainder of my time.

John G. Roberts, Jr.:

Thank you, counsel. Mr. Yang.

Anthony A. Yang:

Mr. Chief Justice, and may it please the Court: The intent required in this bank fraud scheme — case is an intent to deceive the bank for the purpose of depriving it of something of value.

John G. Roberts, Jr.:

Well, all right. Sorry to stop you so early on, but I did not understand that to be the argument in your brief. I’m looking at the heading C on page 36. Section 1344(1) requires proof of an intent to deceive a bank, not to cause it monetary loss.

It — so I didn’t understand — I’m not sure what — when Justice Kagan proposed, asked, suggested she was going to ask you the question, I guess I a.m., I did not think — I did not think you agreed with the Petitioner because I think the Petitioner is saying very strongly intent to deceive is not enough.

And I understand you to say that it is.

Anthony A. Yang:

I’m sorry that the — the heading was a little incomplete, but I think the rest of our brief, when you take it in context —

John G. Roberts, Jr.:

What’s missing?

Elena Kagan:

Well, not just the heading, but analysis in that part C as well.

I mean, the part C just seems to contradict part A or B or whichever it was.

Anthony A. Yang:

What we were trying to —

Elena Kagan:

If you really mean an intent to deceive is not enough, that you need something about to deprive the bank of its property interest.

Anthony A. Yang:

Yes.

And I think if you look, for instance, at page 14 and then at page 17 of footnote 1, at page 31 we say what’s required is 1344(1), which is on page 14, reaches deceptive schemes designed to deprive the bank of property. Then on —

John G. Roberts, Jr.:

What does the — do they have to have the intent to deprive the bank of property?

Anthony A. Yang:

Well, when you’re designing — when you’re — there’s only one schemer here, right, so the scheme is his scheme.

And does the scheme have to deprive the bank of property? That’s what the jury instructions —

John G. Roberts, Jr.:

Okay.

I just want to clear up that it is not enough to deceive a bank, right?

Anthony A. Yang:

No, no, no, of course —

John G. Roberts, Jr.:

Well, not of course, since that’s what you said.

Anthony A. Yang:

My apologies.

I think, though, that when you take a look at the other parts of our briefs, and apology that we were trying to — trying to distinguish —

John G. Roberts, Jr.:

Okay.

Anthony A. Yang:

— between intent to harm from the intent to deceive, and we used some words that may have lead to confusion.

That’s not our position.

John G. Roberts, Jr.:

Well, then if that’s the case, then it all comes down to the instruction, deceive, cheat or deprive a financial institution of something of value. Because you — as I understand your position as clarified, you do have to have the intent to deprive a financial institution of something of value.

Anthony A. Yang:

Right.

John G. Roberts, Jr.:

Okay.

Well, then it’s all a question of whether “deceive” and “cheat” stand alone, or if they are also modified by “of something of value.”

Anthony A. Yang:

I think there’s actually a deeper disagreement here, and I’m happy to talk about the jury instructions, and the jury instructions, of course, have to be read as a whole.

And when you read that, and particularly in conjunction with the materiality requirement, which is discussed — in a material matter, you have to deceive the — defraud the bank as to a material matter, and a material matter is one that has a tendency that causes the bank to part with money or property — I think when you read the instructions as a whole, there’s really no problem with the instructions, but there’s a really — there is a deeper argument here. And that is the argument that Petitioner says that you have to intend to take something that you know is a property interest of the bank.

You have to have knowledge of that.

Anthony A. Yang:

And I had thought until today that they were disputing whether a possessory interest was enough, but they’ve given that up.

Elena Kagan:

Yes, so it seems to me, Mr. Yang, that the real disagreement that you have is that Ms. Bell wants to equate and intends to deprive a bank of a property interest with an intent to have a bank suffer a pecuniary loss in the end.

She says those are the same things.

You say they’re different things. Let’s assume you’re right.

Let’s assume that that’s — that whether the bank in the end suffers a monetary loss is utterly irrelevant to the form of intent that’s required by this statute.

All right? So you won that one, let’s say.

Anthony A. Yang:

Okay.

Elena Kagan:

Go back to the Chief Justice’s question about how these instructions reflect that there needs to be an intent to deprive the bank of a posessory interest in property.

Anthony A. Yang:

I will go to those instructions, and I’m kind of happy to discuss them, but I don’t think that’s the end of the matter.

I do think that there are actually two questions that are — that Petitioner is trying to merge that are distinct.

And they’re actually —

Elena Kagan:

I thought I was giving you them.

Anthony A. Yang:

No, no.

They’re making two arguments.

One —

Anthony M. Kennedy:

But could we talk about the instruction? I know —

Anthony A. Yang:

Yeah.

Yeah, I just want to —

Anthony M. Kennedy:

— that’s the — that’s the last part of your argument.

We want it first.

Do you mind? Okay.

Anthony A. Yang:

Not at all.

I’m happy to discuss it.

But in terms of the enduring legal consequence of this Court’s decision, the bigger ones I’d like to get to.

But I will discuss the instructions here.

Anthony M. Kennedy:

Well, we know there’s a big picture in the world, but we want to know about the instructions first.

Anthony A. Yang:

The instructions —

John G. Roberts, Jr.:

The enduring consequence to Mr. Shaw is a little bit different, so —

Anthony A. Yang:

Undoubtedly.

But the Court generally doesn’t take cases for error construction, and I want to — and in the government’s interest goes to the broader question of what does Section 1344(1) —

Elena Kagan:

Say, Mr. Yang, the instructions.

Anthony A. Yang:

So on the instructions — this is at pages 17 through 19 of the joint appendix.

And the first instruction that’s relevant is the instruction that the defendant has to have knowingly executed a scheme to defraud — that’s a defined term — a financial institution as to a material matter. Now, we look — if you turn the page to 18, the scheme to defraud is a scheme in which someone intends to deceive, cheat or deprive a financial institution of something of value. Here there’s only one schemer.

So the schemer, the one that created the scheme, had to intend to deceive, cheat or deprive a financial institution of something of value. Now, remember the first instruction that we discussed talks about — has to be a scheme to defraud as to a material matter.

If you go further down on page 18, a material matter is one that has the necessary tendency to influence or is capable of influencing the financial institution to part with money or property. This is what a scheme to defraud is. Now, I don’t think when you take that in context, and you have to read instructions holistically, that there’s really any question —

Sonia Sotomayor:

Don’t forget instruction 21.

You’re cherry-picking.

Anthony A. Yang:

Well —

Sonia Sotomayor:

An intent to defraud is an intent to deceive or cheat.

Anthony A. Yang:

Right.

And then we’ll have to go back to instruction 17 to see how that fits in.

The second part is you also have to independently find that you did so; that is, execute the scheme to defraud that we discussed as to a material matter, with intent to defraud the financial institution. So their intent to defraud simply says you have to intend or deceive or cheat, again, the financial institution.

That’s somewhat superfluous in a single-person fraud scheme like this because you’ve already defined the scheme to embed those requirements.

John G. Roberts, Jr.:

Well, but you’ve kind of — instruction, you do read it in context, but if I read instruction 18 in the context of 21, it kind of highlights that you have deceive or cheat separate from the deprivation of something of value. So linguistically, you have to say that what they meant in the instructions was somebody who intends to deceive a financial institution of something of value.

And that’s just not grammatical.

Anthony A. Yang:

It’s not great, but it’s not — but it’s not unacceptable here because —

Stephen G. Breyer:

It’s okay once you put in the word “material” —

Anthony A. Yang:

I think —

Stephen G. Breyer:

— which is what you have in instruction 17.

Anthony A. Yang:

I think that’s —

Stephen G. Breyer:

It says you have to execute a scheme or defraud a financial — to defraud a financial institution as to a material fact.

So that assumes it was separate.

Anthony A. Yang:

No, no.

But the material —

Stephen G. Breyer:

The deceive was separate. You would have to deceive the financial institution as to a material fact, which is defined in instruction 19 as one that has a natural tendency to influence a financial institution to part with money or property. So what you took away in instruction 21, you gave back in instruction 19.

So it’s a —

John G. Roberts, Jr.:

And so in 18, sales deceive, cheat or deprive a financial institution of something of value.

“Something of value” goes right along with “deprive,” but it doesn’t go along with “deceive.”

Anthony A. Yang:

I don’t think that’s correct.

I understand Your Honor’s challenge here.

Anthony A. Yang:

It’s that the — you would say, like, out of something of value normally if you were saying it by itself.

But when you have a series of verbs, it’s not uncommon in — in common parlance simply to use the appropriate, you know, function word “hereof” with — that connects to the last word.

So when you say deceive, cheat or deprive a financial institution of something of value, the normal juror is going to understand that that means you’re deceiving the financial institution, cheating the financial institution.

John G. Roberts, Jr.:

Not if they — not if they — not if they read instruction 21, which talks — has nothing to do with — it just says intent to deceive or cheat, nothing of something of value.

And when you quote the instruction on page 46 to make it read, to make it make sense, you have to add in, as you do, after deceive, deceive the bank out of something of value —

Anthony A. Yang:

But I think —

John G. Roberts, Jr.:

— Because it makes no sense to say deceive of something of value.

Anthony A. Yang:

It doesn’t even parse under Petitioner’s reading because I think Petitioner at least thinks that you have to deceive, cheat or deprive the financial institution — like, deceive the financial institution.

Elena Kagan:

They’re kind of right.

It doesn’t — it doesn’t parse neatly under either reading. But I have to say that if I’m a reader, the way I understand this is you have to — you have to show — the scheme has to be one to deceive a bank, to cheat a bank or to deprive a bank of something of value.

And in that case, the “deceive a bank” is operating as a disjunctive clause without the “of something of value.”

Anthony A. Yang:

No, I think actually you could read —

Elena Kagan:

It’s to deceive a bank alone, cheat a bank alone, or deprive a bank of something of value.

And so I’m a juror.

I say, well, it’s enough if the bank was deceived.

Anthony A. Yang:

I don’t see how you can read — you might say just “deceive” in the abstract.

Elena Kagan:

No, it’s got to be that you’re deceiving somebody.

Anthony A. Yang:

Well, but if you’re deceiving the bank, if a financial institution, which follows, connects to deceive, then so does “of something of value.”

Elena Kagan:

Well, I don’t think so because that would make no sense.

It would be the scheme must be one to deceive a bank of something of value.

Whoever would use words like that?

Anthony A. Yang:

I understand that it’s a slightly — there is a slight grammatical issue with this language.

Elena Kagan:

Well, I think it’s more than grammatical.

It’s just — like, it doesn’t make sense.

Anthony A. Yang:

I think when you read it in context, right, you have to take this — this is the definition of scheme to defraud.

When you read this in context with what you are — the jury is required to do, knowingly executed a scheme to defraud a financial institution as to a material matter.

Right? So that scheme has to be with regard to a material matter.

That material matter has to lead the bank — has a tendency to lead the bank to part with money or property. So when you take that in context, what does that mean? What’s the material matter mean? The only way you can make sense is if you’re actually depriving the bank of money or property.

That is something of value. Now, if the Court has concerns about how this parses, the Court could decide the legal question, which is the important issue here, and simply —

Sonia Sotomayor:

Why has — why has the government forgotten when it’s at trial that simplifying things for juries is always the best thing? Do you really think that any juror reading this would parse it with the care that you are? Why can’t you just say something like a scheme to defraud a bank is a scheme to — what was the three words? — to deceive or cheat the money and to — to cheat the bank of some interest in money or property?

Anthony A. Yang:

I completely agree that simplicity is the — is preferable.

I don’t think there’s a problem with what we have here, but I will even one up you on the simplicity.

I think the proper instruction is scheme to defraud is one to intended to deceive the bank for the purpose of depriving of it of something of value.

Just get rid of the disjunctives, right? That would be the better — the instruction for a single-member bank fraud scheme. Now, things get a little complicated when you have schemes with multiple members.

We don’t have to discuss it.

It is discussed in footnote 10 of our brief. But for the purpose of this case, that would be simple.

We think that the instructions, they’re not perfect, but they’re — they — they convey and the jury would have found the requisite requirements of bank fraud.

And if the court has any doubts —

Anthony M. Kennedy:

Well, what is the — what do we cite for that? Is there something in our cases that say that the instructions had to be read in the context of what the jury heard or something like that?

Anthony A. Yang:

I think the —

Anthony M. Kennedy:

I mean, we’d say close enough for government work.

Anthony A. Yang:

I don’t think we’ve quite said that, but I — it’s in pages 44 or 45 of our brief, which is the general proposition that you just have to — that bank fraud — excuse me — that — jury — this is 46 — jury instructions must be viewed in the context of the overall charge.

And when you look at this in light of the materiality charge, any kind of ambiguity that might have been interjected in the definition of scheme to defraud I think is sufficiently displaced.

John G. Roberts, Jr.:

It’s just not the instruction.

It’s what the court of appeals held.

The court of appeals held, in short — this is a quote — “The defendant was guilty of bank fraud because he intended to deceive the bank.” Full stop.

So it’s not just a problem with the instructions.

It’s a problem with what the court of appeals held.

Anthony A. Yang:

Again, I think this may be a problem with some brevity.

I don’t think the court of appeals meant to say if you walk into the bank and tell the bank, you know, the nationals lost their game and don’t have home field advantage that that’s bank fraud. Of course, the court of appeals knows it’s an order to obtain something from the bank.

That’s what bank fraud is.

And I don’t think that, you know, just as the heading for our brief in Section C might not have been fully complete, the same thing for the court of appeals opinion. But I’d like to get back to I think what’s a broader issue here, which is what is the intent required.

And particularly —

Ruth Bader Ginsburg:

Just tell us: Why didn’t — why didn’t the government charge under (2), which your colleague has agreed fits this case, that if he had been charged under (2) and convicted, that would be fine?

Anthony A. Yang:

Because under (2), you need to actually prove a misrepresentation.

Ruth Bader Ginsburg:

Because under (2) you have to prove —

Anthony A. Yang:

You have to prove a false statement or false misrepresentation.

Now, in the context of crimes that occur over the Internet, there’s some complications that are involved with that.

The charging decision was to take (1) — clause (1) remember is scheme to defraud.

This is the — the mothership of language from the fraud statutes.

Anthony A. Yang:

It comes from the mail fraud and the wire fraud.

Congress knew that this was broad, and Congress intended to adopt it specifically because it was broad. And, in fact, Congress considered drafting language that would have required scheme to harm, cause economic loss to a financial institution, and specifically rejected it after the Department of Justice said, hey, that’s too narrow.

Scheme to defraud is broader, and this would unduly narrow the statute. So the government chose clause (1) because it was the broader clause, and we didn’t need clause (2) which — it could have complicated proof a little bit. Now, on the two questions that Petitioners presented, two kind of legal questions are, does the defendant have to have some knowledge of the legal property status of the thing that’s being taken? I think the answer is clearly no. Willie Sutton in the 20th Century, to move off from Jessie James, he robbed banks because that’s where the money is.

Now, if Willie Sutton believed all the money he took was customer deposit accounts, didn’t belong to the bank, he didn’t ever intend to harm the bank, he’d still be — you’d still call it bank robbery. And if he did the same thing through deceit, you’d call it bank fraud. Now, there’s no reason to add this additional intent knowledge about the property status of the thing that’s being taken.

It doesn’t advance any interest that Congress is trying to advance is to protect the integrity of banks.

The cost of the bank does not depend on what’s subjectively in the defendant’s mind, about what they think, is it owned by, is it ownership interest, is it a possessory interest, is there insurance, is there not insurance.

It depends on the nature of the actual scheme and what’s being taken. Congress would not have wanted to distinguish between defendants who execute the same — the same scheme based on the idea that once defendant is sophisticated —

Stephen G. Breyer:

So what’s the right words?

Anthony A. Yang:

The right words?

Stephen G. Breyer:

For the — I mean, there — there are many situations.

Do you — you require an intent that there be property? Well, how do you want to say it, an intent to injure the bank in its property? How do you say it? Look, some people, bank robbers go into banks.

They take the customers — they line the customers up against the wall, and they take out their billfolds.

Is that defrauding the bank?

Anthony A. Yang:

No, no.

Because you’re obtaining it from the customer.

Stephen G. Breyer:

Yeah, yeah.

So how do you want to do this one?

Anthony A. Yang:

So in bank fraud, the intent required — and remember, there’s more than just intent. As a fact we do have to prove there was a property interest to the bank.

So, for instance, in your example —

Stephen G. Breyer:

There was, but it was a property interest in the bank.

What do you have to prove in respect to that property interest is in the defendant’s mind?

Anthony A. Yang:

So the only intent required is the intent to deceive the financial institution in order to obtain something of value.

Now, that something of value —

Stephen G. Breyer:

In order to obtain something of value, so that it could be of value and belong only to the customer?

Anthony A. Yang:

That — that complicates things I think in the —

Stephen G. Breyer:

Yes.

That’s why I want to know — that’s why I need to know the words.

Anthony A. Yang:

There’s no more required for intent.

Now, in order to —

Elena Kagan:

I quoted you it was, that it’s an — it’s an intent to deprive the bank of a property, including a possessory interest.

Anthony A. Yang:

No.

And the reason it’s something of value that in fact is a possessory interest.

Whether or not — or a property interest. Whether or not the defendant knows it’s a property —

Elena Kagan:

Yes.

But the bank — the bank has to have a possessory interest in — a property interest in this thing.

Anthony A. Yang:

Right.

And property interest is broad.

But the defendant doesn’t have to know about that property interest.

It just has to know I’m trying to get money, that I want the money, and that’s enough. Now, the money happens to, in fact, be a property interest to the bank, but the defendant doesn’t have to know that.

We don’t require our defendants to have taken property law or banking law or studied the risk of loss rules when frauds occur to banks.

None of these things have to be in the knowledge or of — or beliefs.

Anthony M. Kennedy:

What does he have to know about? Does he have to know that the bank is involved? I mean, what does he have to know about the bank?

Anthony A. Yang:

He has to know that he —

Anthony M. Kennedy:

That the bank is likely involved? I mean, this is pretty easy because he sent a check, but —

Anthony A. Yang:

Well, no, I think what’s required is — and let me take a step back.

When we’re talking — we’re talking about financial institutions, and it might help to refer to page 1A of the government’s appendix.

Financial institutions are not just banks.

Financial institutions include certain banks when they are FDIC insured, certain credit unions, and then a whole slew with ten — a list of ten other things.

It includes a small business investment company —

Anthony M. Kennedy:

Okay.

But here we have a bank.

What did this defendant have to know about this bank, if anything?

Anthony A. Yang:

It didn’t have to know its status as a bank under the statute.

It just had to know it’s taking something from this entity, which in fact, again, is a bank under the statute.

It could be a holding company.

It could be — it could be any of these things.

If taking something from this entity by deceit, and that’s the intent, right? Something of value from this entity by deceit.

It doesn’t have to know does this entity — is it a small business investment company defined under Section 103 of the Small Business Investment Act? It doesn’t have to know these things. And the reason is once you get into the realm of fraudulently taking something from an entity, it — that’s criminal conduct.

And the additional requirements that it is a bank, that’s the jurisdictional hook.

It’s similar to —

Anthony M. Kennedy:

It has to know that a financial institution is involved?

Anthony A. Yang:

It doesn’t have to —

Anthony M. Kennedy:

I mean, that’s Section 1.

Anthony A. Yang:

It doesn’t have — it has to — it doesn’t have to have any knowledge about whether the entity that it’s depriving of property qualifies as a financial institution.

It could be, for instance, a small kiosk in a grocery store that’s conducting transactions and happens actually to be a bank outpost, but you don’t know it’s a bank.

But you rob a bank or you — you defraud the bank, it’s still — you don’t have to have knowledge of its status as a financial institution. There are several examples.

Bank robbery or larceny, under Section 2113(a) and (b), the courts held you don’t need to know that the entity robbed is a bank. That’s Trubino in the Fifth Circuit, Shaw in the Seventh Circuit.

Theft of U.S. property — if you steal U.S. property, you don’t have to know it’s owned by the U.S. There’s a recent case called Reedhack in the Eighth Circuit that surveys the unanimous views that you don’t have to have knowledge of the status as property of the United States.

Ruth Bader Ginsburg:

And can you clarify for us, what is in the overlap area? What is covered only by (1) and what is covered only by (2)?

Anthony A. Yang:

They are, of course, cover almost — they are almost coterminous, but there are things that are outside of (1), and there are things that are outside of (2)

What’s outside of (1) are schemes that — schemes where you do not — fraud is not targeted at the bank or — yes, so (2) — let me — let me start over.

It’s a little confusing. (2) is broader than (1) in the following respect: It covers —

Ruth Bader Ginsburg:

(2) covers what?

Anthony A. Yang:

(2) — clause (2) is broader than (1) because it covers schemes to deceive the custodian of bank property.

(1) does not because the deception has to be directed at the bank.

But (1) covers things that (2) does not, because (2) is limited only to false statements.

This is what Loughrin explained in a footnote.

(1) covers frauds that are based on nonstatement-type deception; for instance, check hiding. Checks are not statements about the balance in the account.

Check training is covered. Other behavioral type of frauds.

If, for instance — it’s a little farfetched, but you could have someone that impose — that, you know, dresses in a disguise and just walks into the bank.

The bank lets them into the — it’s a well-known customer, walks in the safety deposit box, takes out the money.

No statement’s made.

(1) would cover that kind of thing. Now, these areas are, you know, on the fringe.

The two terms, the two provisions largely overlap, and that’s not surprising because the language that was the impetus for two was language that the Court adopted in Durland in construing the term “scheme to defraud.” So there’s a lot of overlap between these two things, and that’s what Justice Kagan recognized in Loughrin. But they both have independent meaning, not a lot, and so, you know, they often can be used at the same time, but they are independent.

Elena Kagan:

Mr. Yang, you referred to us, money in a security deposit.

Your answer would be the same, right —

Anthony A. Yang:

Yes.

Elena Kagan:

— if — if somebody went in and said, I’d like to see the security deposit boxes, and — and made a false statement to the bank about his entitlement to see the security deposit boxes and took the money out?

Anthony A. Yang:

Yes.

Elena Kagan:

Doesn’t — you know, the bank still has a possessory interest in that, even though it doesn’t use that money in the same way; is that correct?

Anthony A. Yang:

Correct.

Elena Kagan:

Let me give you another example.

Suppose that I’m sitting in a coffee shop and somebody comes up to me and says, I have to make a phone call; would you just hang on to my computer for a minute? And then disappears, and then somebody else comes up, the fraudster comes up, and says, oh, she just told me to pick up her computer from her —

Anthony A. Yang:

Uh-huh.

Elena Kagan:

— and that’s a misrepresentation.

Anthony A. Yang:

Uh-huh.

Elena Kagan:

But I give him the computer.

Anthony A. Yang:

Uh-huh.

Elena Kagan:

Do I — have I had a possessory interest in that computer just because somebody said, why don’t you take a look, you know — you know — keep — keep your eye on this?

Anthony A. Yang:

Gratuitous bailee is what they would be.

And I think the answer is — I think we would say yes for purposes of the — the fraud statute. Now this wouldn’t, of course, be bank fraud. And —

Elena Kagan:

Yeah, yeah, yeah.

But I mean —

Anthony A. Yang:

But — but —

Elena Kagan:

What you’re essentially saying is that anything I can think of, any hypothetical I can think of which involves my hanging on to something for somebody else, that I have a possessory interest in that sufficient to satisfy this scheme.

Anthony A. Yang:

Yeah.

And I don’t — it’s sufficient for this purposes.

And I don’t think this is unusual.

Oftentimes, rights and interest in the law are relative to other people.

So your possessory interest would not be superior to the person who owned the laptop.

But it would be superior as to third parties having no claim of right — no valid claim of right to the laptop. So yes, that, I think, could fall within the general understanding of a scheme to defraud. Obviously, not a scheme to defraud a financial institution.

Elena Kagan:

I mean, that suggests to me that as long as the person knows that the money is being — is in the bank somehow, it just shouldn’t matter, because anything counts as a possessory interest, right?

Anthony A. Yang:

It shouldn’t — it shouldn’t matter at all.

And I think that emphasizes why Congress would not have wanted to add some additional knowledge requirement about the property status of the money.

Why does it matter? All it does is complicate things. Congress would not have wanted to carve out this type of conduct as noncriminal.

And in fact, it’s important to recognize, even Petitioner says she’s not — he’s not carving out anything that’s not noncriminal. In page 25 of the reply brief, Petitioner says it’s a — essentially, a pleading game.

Well, why would Congress have wanted to make the broad language of scheme to defraud, which has a history going back more than a century, to be a narrow appendage on something else in order to force the government into a pleading game, when no — at the end of the day, if it’s pled properly, it’s still an offense punished by the same time.

It just doesn’t make any sense. This is not what Congress intended.

It has no — no basis in the text or history of the bank fraud. When you look at what Congress did in the legislative history, it rejected language that would have adopted the same thing.

As far as I can tell, everything points against Petitioner here. If the court has no further questions.

Anthony A. Yang:

We’d ask that you affirm.

John G. Roberts, Jr.:

Thank you, counsel. Ms. Bell, you have three minutes remaining.

Koren L. Bell:

Thank you, Mr. Chief Justice. To get back to Justice Breyer’s question about where in the record was this disputed, that — that is at pages 646 to 647.

And there, counsel — myself — specifically made the argument that the problem with this — this instruction, exactly as Justice Sotomayor, and I believe Justice Kagan, pointed out, is the disjunctive wording of intent, the intent to defraud.

Sonia Sotomayor:

Counselor, assume I agree with you —

Koren L. Bell:

Yes, Your Honor.

Sonia Sotomayor:

— that there were parts of your argument, both below and here in your brief, that suggested the instructional error.

But what I find is that the way you presented the argument was confusing.

Koren L. Bell:

Yes.

Sonia Sotomayor:

It took a lot of teasing out. Does — how does that affect what we do.

Koren L. Bell:

Yes, Your Honor.

Sonia Sotomayor:

That — that you weren’t clear in the instruction, don’t you forfeit that argument?

Koren L. Bell:

No, Your Honor.

The — the claim is that the intent to — we challenge —

Sonia Sotomayor:

I — I know what your two claims are.

Koren L. Bell:

Okay.

Sonia Sotomayor:

The question is if I disagree —

Koren L. Bell:

Yes.

Sonia Sotomayor:

— with your basic premise that you need to prove pecuniary loss to the bank — I know you want to win that, but please accept my hypothetical.

I disagree with you that the only — that the only issue is that you have to cheat and deprive the bank of a possessory — of something in a possessory — in their possessory interest.

Okay? Simple as that.

It doesn’t have to cause — you don’t have to intend to cause pecuniary loss.

All right? Where does that leave your instructional error?

Koren L. Bell:

It’s — it’s still an error, Your Honor, because it permitted a conviction on the basis of the mere intent to deceive the bank.

And there’s no curing it, looking to, for example, the materiality component of the instruction, how —

Sonia Sotomayor:

How about if I find that what you — that you didn’t articulate your argument clearly enough to the court below, or to us? Where does that put you? Have you forfeited? Do you waive? Have you done something?

Koren L. Bell:

No, Your Honor.

The — the challenge was always to the disjunctively-worded jury instruction.

And that was consistently made from the district court to the court of appeals and to this Court.

The only question has been how to formulate; if more than intent to deceive is required, then what more? How do we explain that second component? Hammerschmidt itself, which is the undisputed applicable definition here, uses a number of different formulations, and that’s part of where the confusion comes from. Hammerschmidt says the intent to defraud is the intent to deceive, and it also uses the — and to wrong a bank in its property rights.

Koren L. Bell:

It equates to wrong a bank in its property rights with to deprive a — I’m sorry — a victim. It equates to wrong a victim in its property rights with depriving a victim of something of value, and it also equates that with cheating a victim out of something of property, and also.

To make matters even more confusing in terms of the number of formulations, it says that the mail fraud statute is limited to the infliction of pecuniary or property loss.

And so our formulations come out of the Hammerschmidt case. And what we have always asked the Court to do here is to construe intent to defraud to require, not just the intent to deceive, as the lower court instructions required, but also the intent to do that second thing, which is —

John G. Roberts, Jr.:

Thank you, counsel.

Koren L. Bell:

Thank you.

John G. Roberts, Jr.:

Case is submitted.