16 F.4th 256
9th Cir.2021Background
- Dan Heine (CEO/board member) and Diana Yates (CFO/executive) of the Bank of Oswego were indicted for one count of conspiracy to commit bank fraud (18 U.S.C. § 1349) and multiple counts of making false bank entries (18 U.S.C. § 1005) arising from efforts to mask the bank’s poor condition.
- The government advanced three principal theories at trial: deprivation of (1) accurate financial information, (2) the defendants’ salaries/bonuses (salary‑maintenance), and (3) the bank’s funds (unauthorized use/diversion). The jury convicted on the conspiracy count and 12 false‑entry counts; defendants were sentenced to prison.
- On appeal the government conceded (and the panel held) that the accurate‑information theory is legally insufficient because there is no cognizable property interest in mere accuracy of information.
- The panel also held the salary‑maintenance theory legally insufficient because it effectively repackaged an intangible‑honest‑services type claim (maintaining existing salary) as property deprivation—an impermissible end‑run around Skilling and § 1346.
- Although the bank‑funds theory can, in principle, support bank‑fraud liability, the court found the two invalid theories were central to the prosecution and not harmless beyond a reasonable doubt, so it vacated the conspiracy conviction and (because the jury was instructed on Pinkerton co‑conspirator liability) also vacated the false‑entry convictions.
- The panel separately reviewed sufficiency on counts 7–9, 13, and 15: counts 7–9 and 15 were unsupported (payments were real or from an employee), while count 13 (unauthorized transfer from Dudley’s campaign account) was supported.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether depriving a bank of "accurate information" is "money or property" under bank‑fraud statute | Accurate financial information in books/records is "something of value" the conspiracy sought to deprive the bank of | No cognizable property interest in mere accuracy of information; only money or property qualify | Accurate‑information theory legally insufficient; no property right in mere accuracy |
| Whether maintaining defendants' salaries/bonuses (salary‑maintenance) qualifies as deprivation of property | Defendants lied to keep bank performing and thus preserve their salaries and bonuses (money) | Maintaining an existing salary is an intangible/honest‑services type harm, not a property object of fraud | Salary‑maintenance theory legally insufficient; criminalizing this would circumvent Skilling/§ 1346 limits |
| Whether defendants' diversion/unauthorized use of bank funds suffices as property deprivation and whether invalid theories were harmless | Diversion/use of bank funds was an object of the scheme and can constitute deprivation of property | Even if bank‑funds theory viable, prosecution relied heavily on two invalid theories so error not harmless | Court assumed bank‑funds theory could be valid but held invalid theories were not harmless; vacated conspiracy conviction and, because of Pinkerton instruction, false‑entry convictions |
| Sufficiency of evidence for false‑entry counts 7–9, 13, 15 (omitting loans from FDIC call reports after third‑party or employee payments) | Omitted loans were falsely reported as not past due because payments were contrived to mask delinquencies | Payments were real (third party or employee) so call report entries were literally true; no falsity absent requirement to disclose payer | Counts 7–9 and 15: insufficient evidence (payments were real or employee‑funded); Count 13 (Dudley): sufficient—unauthorized transfer from campaign account rendered entry false |
Key Cases Cited
- Shaw v. United States, 137 S. Ct. 462 (scheme to defraud must deprive victim of money or property)
- Kelly v. United States, 140 S. Ct. 1565 (property must be an object of the fraud; incidental costs insufficient)
- Skilling v. United States, 561 U.S. 358 (limits of honest‑services theory under § 1346)
- McNally v. United States, 483 U.S. 350 (fraud statutes protect property rights, curtailed intangible‑rights doctrine)
- Carpenter v. United States, 484 U.S. 19 (trade secrets/confidential information can be property in certain contexts)
- Neder v. United States, 527 U.S. 1 (interpretation of "scheme or artifice to defraud" in fraud statutes)
- Darby v. United States, 289 U.S. 224 (false entry when recorded transaction does not exist)
- Coffin v. United States, 156 U.S. 432 (entry is not false if transaction actually occurred as recorded)
- United States v. Ely, 142 F.3d 1113 (omissions of material facts can render an entry false)
- United States v. Sadler, 750 F.3d 585 (no property interest in mere accurate information)
- United States v. Lewis, 67 F.3d 225 (intangible right to make informed business decisions is not property)
- Pinkerton v. United States, 328 U.S. 640 (co‑conspirator liability for foreseeable acts in furtherance of conspiracy)