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While it is illegal under federal law to knowingly participate in a ‘scheme or artifice to defraud,’ generally, it is a separate offense to knowingly “defraud a financial institution” or “obtain any of the moneys, funds, credits, assets, securities…of a financial institution by means of false or fraudulent pretenses.” This offense is otherwise known as bank fraud and carries up to a $1,000,000 fine and 30 years in prison under 18 USC 1344.
Prosecutors use this statute to go after bank executives and officers who knowingly allow bank resources to be dispensed upon false grounds or deceptive representations by loan applicants. The statute is also used to go after non-bank participants in such schemes. For example, many mortgage fraud schemes call for inflated loans to purchase homes, mobile homes, or other real property where participants split the excess cash dispensed.
This means that false statements on loan applications, usage of appraisers to inflate values, incentivizing inspectors to overlook property defects or just about any falsity within the lending process can become the basis of a federal investigation and/or prosecution.
It is also important to recognize that bank fraud can be used to prosecute defrauding other financial institutions such as credit unions, federal home loan banks, Farm Credit Systems, small business investment companies, and even some foreign banks. Basically, any institution that is insured under the FDIC. The definition for “financial institution” can be found in 18 USC 20.
Unfortunately, many transactions within financial institutions involve a large number of personnel. That is, loan officers, title preparers, and a host of other persons may touch a given financial transaction. All of these persons could be targets or witnesses if an investigation is launched. Obviously, some of these persons may not be part of a scheme (if one even exists). It is important for persons who are sought for questioning by federal or state law enforcement officials to take steps to evaluate whether there is criminal exposure by contacting an experienced federal criminal defense attorney.
It is even more important for attorneys to be proactive when an investigation commences. This includes trying to get information regarding what exactly federal agents suspect may be occurring and reviewing any pertinent documentation. Most critical, is to consult with persons who find themselves wrapped within an investigation and determine a strategy that will either involve gathering materials to demonstrate non-participation in a scheme or, in the alternative, cooperating with investigators in an effort to avoid prosecution or mitigate criminal exposure.
Unfortunately, many persons choose to instead speak with federal agents thinking they can simply explain their way out of trouble. This overlooks the reality that agents are adept at interrogating and making persons feel comfortable talking. The single most important piece of advice you can take from this article is not to talk to investigators.
Under the United States Sentencing Guidelines, the value or ‘loss amount’ within a particular bank fraud prosecution drives the likely punishment range. (Some 60-80% of federal sentences fall within the guideline range).
The applicable guideline is USSG 2b1.1. The base offense level is 7 because 18 USC 1344 carries a possible sentence of more than 20 years. This level can be enhanced up to 30 levels depending on the loss amount. Other enhancements include possible increases for more than 10 victims, causing substantial hardship, use of sophisticated tactics/means, or even specific enhancements for receiving more than $1,000,000 from a financial institution.
It is also important to keep in mind that schemes are often prosecuted as conspiracies under federal law. This means that the agreement itself is the activating element and all conspirators’ activities can be combined to calculate a loss amount. For example, multiple loans or false transactions can be accumulated to generate one singular large loss amount that could be applied to various players within the scheme. These applications don’t always reflect the level of participation of a particular defendant.
The federal statute of limitations for bank fraud is generally five years.
The former federal prosecutors at our firm have handled investigations and prosecutions of federal fraud cases, so we know how the government builds a case. We now defend allegations of white collar crimes including bank fraud. The prior experience as federal prosecutors give us real insight into how these cases are developed and handled in the courtroom. If you believe you might be under investigation, contact an attorney immediately