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Bank Fraud – 18 U.S.C. 1344

Bank Fraud

Bank Fraud, codified in 18 U.S.C. 1344, is one of many types of fraud criminalized by the federal government.  Bank fraud specifically targets any scheme or artifice to defraud a financial institution, including banks and credit unions.  The government often uses bank fraud to charge individuals for passing fake checks (check-kiting), mortgage fraud, fraudulent loans, and many other types of conduct that involve lies or deceit to obtain money or property.  Bank fraud is often charged in conjunction with wire and/or mail fraud.

The Henry Law Firm PLLC has effectively represented clients facing bank frauds of all kinds.  We have defended individuals in cases involving false loan applications, mortgage frauds, passing fake checks, and other types of bank fraud.  In some instances we have obtained deferred prosecutions or probation.  We are well equipped to review your case, investigate the government’s claims and mount a defense to all kinds of bank fraud schemes.

18 U.S.C. 1344

The bank fraud statute is very short.  Despite its’ brevity, it is a very broad statute that encompasses a multitude of criminal acts.  18 U.S.C. 1344 states simply that:

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.

The concise language and lack of limitations allows the government to apply it to many types of activity that are not specifically defined.  It is important to remember that the “financial institution” must be a federal chartered or insured institution.  However, banks that are not themselves federally chartered or insured, but are the subsidiary of the issuing institution or substantially involved in the transaction, may also qualify as a financial institution under this statute.

The most hotly contested issue in many fraud cases is the definition of a “scheme to defraud.”  Courts around the country have issued hundreds of opinions on the definition of scheme to defraud, but the Second Circuit summed it up saying:

“Scheme to defraud” within bank fraud statute is not capable of precise definition but is measured in particular case by determining whether scheme demonstrated departure from fundamental honesty, moral uprightness, or fair play and candid dealings in the general life of the community.

U.S. v. Ragosta, C.A.2 (Vt.) 1992, 970 F.2d 1085.

Because no precise definition exists, the government oversteps their bounds in some instances and charge conduct that does not qualify.  Additionally, the information used during the scheme must be material to the transaction.  Immaterial representations, even if false, do not meet the standard for conviction.

Check-kiting is a specific type of bank fraud that involves the use of checks to withdraw money when insufficient funds exist to back the checks.  The Second Circuit has described a check-kiting scheme as “embellished” where:

Defendant committed “embellished” check-kiting, so as to be subject to prosecution under section of bank fraud statute prohibiting schemes or artifices to obtain money of financial institution by false or fraudulent pretenses or representations, where he concealed control over account in one bank from another bank by using checks signed by another person and by having his employees make deposits into account, he carefully coordinated deposits to conceal number and amount of daily deposit, he discussed state of his accounts with branch managers of banks and assured them that overdrafts were inadvertent and any problems would be corrected, and he falsely alleged that he would obtain loan to remedy overdrafts.

U.S. v. Burnett, C.A.2 (N.Y.) 1993, 10 F.3d 74.

But, the Fifth Circuit has said that check-kiting is not an automatic when there are insufficient funds to back a check deposit:

Defendant who had engaged in check kiting scheme by depositing a series of checks, which were not backed by sufficient funds, in various federally insured banks did not violate criminal statute prohibiting obtaining of money from federally insured financial institution by means of false or fraudulent pretenses or representations;  mere depositing of check was not of itself representation that bank account on which it was drawn had a sufficient balance to cover check.

U.S. v. Medeles, C.A.5 (Tex.) 1990, 916 F.2d 195.

The point is that bank fraud is almost never a given.  There is room to litigate whether a person’s conduct constitutes bank fraud.  That is why it is so important to seek out an experienced federal criminal defense attorney to assist you in fighting the charges against you.

Potential Penalties

A violation of the Bank Fraud statute carries a maximum penalty of 30 years in prison, a fine of up to one million dollars, a period of supervised release, and a one hundred dollar special assessment.  A person convicted of Bank Fraud must also pay restitution and is subject to forfeiture.

How We Can Help

The federal criminal defense lawyers at The Henry Law Firm PLLC can help you fight bank fraud charges.  Our firm has handled many kinds of bank fraud cases, understand how to review the documents involved, and we have access to forensic accountant experts and former FBI agents who can assist us in breaking down a case.  We will discuss the conduct the government alleges against you, develop an aggressive, strategic plan to fight back, and put together a team of talented attorneys and experts to defend you. Call us anytime at 646-820-0224 to learn how we can help you.


What to Do If You Are Facing a Money Laundering Investigation

According to experts, around $5 trillion is money laundered around the world each year, and law enforcement authorities recover only a small fraction of that money. But, in spite of this gap – and quite possibly because of it – U.S. law enforcement authorities take an extremely hard line in pursuing the money laundering investigations that do end up on their radar, and it is often tertiary and unsuspecting individuals and entities that find themselves in the crosshairs of a money laundering investigation. While we might think of large banks and other financial institutions when we think of money laundering, it is common for business partners, service providers, art and antique dealers, auction houses, trustees, directors and board members, and all types of financial service providers to get caught up in a money laundering investigation. It is certainly frightening to get a visit, call, or other inquiry from a federal agent or agency – or even to hear rumors of those close to you being approached – but what you do next can have enormous implications for your future.

Understand That Criminal Liability Can Exist Even If You Were “Ignorant”

Again, federal law enforcement takes a very aggressive approach to policing money laundering, and they do this for a number of reasons. One is that it is often more feasible for law enforcement to collect evidence of financial crimes than the crimes that produced the money being laundered, such as international trafficking. Law enforcement can also approach those who may played a secondary and/or unwitting role in the money laundering and use methods to intimidate them and their businesses that might lead them to the persons committing the crimes from which the money profits flowed.

Unlike with many other criminal laws, prosecutors do not have to show that a person willfully (in other words, intentionally) violated federal laws on money laundering in order to secure a conviction. Using the concept of “willful blindness,” prosecutors can successfully argue that a person is guilty of money laundering when he makes efforts to conceal the profits of criminal activity even if he did not know the money was the product of illegal activity but had strong reason to suspect it was. For example, an art dealer facilitating transactions on behalf of a wealthy drug dealer to conceal profits might be charged with money laundering if it can be shown there was a reason to suspect the nature of the funds.

Furthermore, anyone who merely encourages or assists such a transaction (e.g. service providers) could potentially be liable even if he or she was not a primary party to the transaction.

Do Not Wait to Speak With a Criminal Defense Attorney

Does this mean every person connected with a transaction involving money derived from illegal activity is criminally liable? Absolutely not, but it does mean that prosecutors can find a way to pin criminal liability on persons in ways they may well not have imagined. Thus, it is a mistake to speak with law enforcement – or any other non-attorney for that matter (any conversation you have not protected by a privilege may be used against you) – without an attorney under the impression that you have nothing to worry about.

By speaking with a criminal defense attorney experienced in federal investigations at the first sign of a money laundering investigation, you can take steps to determine what your potential criminal liability might be (which may be none, but better to find that out in a confidential consultation with an attorney who represents only your interests), and work with that attorney in communicating with law enforcement to reach your best possible outcome, which can include a dropped investigation or favorable agreement.

Contact a New York Defense Attorney Today

The Henry Law Firm PLLC provides criminal defense to individuals and businesses throughout New York in all state and federal investigations and prosecutions. If you believe you may be under investigation for money laundering, do not hesitate to contact us today to schedule a confidential consultation regarding your matter.  

FAQ: Tax Fraud Penalties

Can I be charged with a crime if my taxes are done incorrectly?

Yes. Not only can the IRS can hand down civil penalties for improperly doing your taxes, federal prosecutors can charge you with a tax-related crime if you fail to file a tax return, provide false or fraudulent statements to the IRS, or willfully evade paying your full share of taxes.

What are the criminal penalties for failing to file a tax return?

You face up to one year in prison and up to $100,000 in fines (or up to $200,000 in the case of a corporation). These penalties also apply when a taxpayer fails to pay taxes on time or fails to supply information to the IRS.

What are the criminal penalties for making fraudulent or false statements to the IRS?

You face up to three years in prison and up to $250,000 in fines (or up to $500,000 in the case of a corporation). Making fraudulent or false statements can apply to statements made in your tax return or to government officials.

What are the criminal penalties for tax evasion?

You face up to five years in prison and up to $250,000 in fines (or up to $500,000 in the case of a corporation).

What is the difference between tax evasion and tax avoidance?

Tax avoidance is the legal process of taking advantage of strategies allowable by the tax code to reduce your taxes. Tax avoidance is therefore legal. Tax evasion is using strategies not allowed by the tax code to reduce or eliminate the taxes you pay. Tax evasion is illegal.

What are common methods of tax evasion that can result in criminal penalties?

  • Failing to report income from a side job
  • Failing to report income from rentals
  • Failing to report income paid in cash
  • Overstating deductions that do not exist, such as charitable donations not actually made

What if a person makes a mistake on their tax returns?

If you negligently make a mistake, then you still may owe civil penalties, but the government cannot convict you of a crime unless it was willful on your part. The standard of proof in showing willfulness is guilt beyond a reasonable doubt.

Can I be charged with a crime for assisting another person or entity in tax fraud?

Yes, as with most crimes, you can be charged with a tax-related crime as an accomplice if you assisted and/or encouraged another person to commit tax fraud.

Contact a New York Criminal Defense Attorney Today

The Henry Law Firm PLLC provides criminal defense to individuals and businesses throughout New York. Contact us today to schedule a confidential consultation regarding your matter.  

Do I Need My Own Lawyer in an SEC Investigation?

If your employer is being investigated by the SEC, then you likely have some questions about the SEC investigation process but may not feel comfortable asking them of your supervisor or co-workers. This is understandable, as an SEC investigation can mean significant civil penalties such as fines, permanent career and reputational damage, or loss of a job. One of the most common questions employees of a company under SEC investigation ask is whether they need their own lawyer, and they often trip themselves up by asking the wrong people to answer that question.

Your Company’s Attorneys Cannot Tell Whether You Need a Lawyer

When an employee learns that an SEC investigation is occurring, it is common for the employee to ask the HR director, the General Counsel, or even an outside law firm representing the company whether the employee needs his or her own lawyer. First, it is critical to understand that all of those people are there to serve the interests of the company, not you the employee.  Thus, it is not their job to be concerned with whether you would be better off from a legal perspective by having your own attorney.

In addition, they might not have any idea what your role in potential SEC violations were and thus whether it would serve your interests to have your own attorney or not. If company attorneys are speaking with you about events related to a potential SEC investigation (also note that the company attorneys are likely not under any obligation to tell you whether an investigation is indeed occurring or not), there is a good chance they know less than you do about potential violations at that point and are indeed speaking with you to gather that information, thus making them even less likely to be able to answer that question accurately.

The Company Attorneys Represent the Company, Not You

Beyond the issue of presenting the question of whether you need your own attorney to company lawyers, regardless of what they might say to you, the fact of the matter is that those attorneys represent the company and not you. Simply put, their allegiance and duties are directed towards representing the company’s interests, and that will always be their overriding mission.

Does this mean they are out to get you and will ultimately throw you under the proverbial bus in an SEC investigation? Not necessarily, and the company (and by extension, its attorneys) may have a strong interest in defending, so long as your interests are aligned with those of the company.

But, when push comes to shove, it is the case that they are not there to defend your interests and formulate legal strategies to protect your reputation, career, and future. In many cases, companies under SEC or other federal investigation can curry favor with law enforcement by showing that they are taking a hard line against employees in the company who have violated laws, and so penalizing and/or terminating an employee can be an action a company takes on the advice of its attorneys to reach a favorable outcome with the SEC. And this outcome may be reached on the basis of information you as the soon-to-be terminated employee provide to the company and its attorneys under the mistaken impression that doing so would help your interests.

Contact a New York White Collar Defense Attorney Today

Thus, if you have reason to suspect you face negative consequences in an SEC investigation of your employer, it is wise to reach out to your own white collar investigations attorney to discuss your options in a confidential setting. The Henry Law Firm PLLC provides white collar defense in SEC investigations to individuals and businesses throughout New York. Contact us today to schedule a confidential consultation regarding your matter.  

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The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship. Prior results do not guarantee future outcomes.