In United States v. Yates, --- F.4th ---, No. 18-30183 (9th Cir. 2021), a divided Court vacated the convictions of two bank executives for conspiracy to commit bank fraud (18 U.S.C. § 1349) and 12 counts of making a false bank entry (18 U.S.C. § 1005).
This is a lengthy and interesting opinion, delving deep into issues regarding the legal validity of the government's theories of prosecution. I include some of the most relevant language below.
The accurate-information theory is legally insufficient. There is no cognizable property interest in “the ethereal right to accurate information.” United States v. Sadler, 750 F.3d 585, 591 (6th Cir. 2014). Although a property right in trade secrets or confidential business information can constitute “something of value,” Carpenter v. United States, 484 U.S. 19, 26 (1987), “the right to make an informed business decision” and the “intangible right to make an informed lending decision” cannot, United States v. Lewis, 67 F.3d 225, 233 (9th Cir. 1995).
Recognizing accurate information as property would transform all deception into fraud. By definition, deception entails depriving the victim of accurate information about the subject of the deception. But “[i]ntent to deceive and intent to defraud are not synonymous.” United States v. Yermian, 468 U.S. 63, 73 n.12 (1984) (quoting United States v. Godwin, 566 F.2d 975, 976 (5th Cir. 1978) (per curiam)). Rather, “the scheme must be one to deceive the bank and deprive it of something of value.” Shaw, 137 S. Ct. at 469.
[T]here is a difference between a scheme whose object is to obtain a new or higher salary and a scheme whose object is to deceive an employer while continuing to draw an existing salary—essentially, avoiding being fired. The history of the Supreme Court’s treatment of fraud in the employment context demonstrates why that distinction matters.
To be sure, the government charged Heine and Yates with conspiring to commit property fraud, not honest-services fraud. But we do not believe the Court intended “to let in through the back door the very prosecution theory that [it] tossed out the front.”
Permitting the government to recharacterize schemes to defraud an employer of one’s honest services—thereby profiting “through the receipt of salary and bonuses,” Skilling, 561 U.S. at 413—as schemes to deprive the employer of a property interest in the employee’s continued receipt of a salary would work an impermissible “end-run” around the Court’s holding in Skilling
We agree that if an employer offers a raise or a bonus tied to some specific performance metric, an employee who lies about having achieved that metric has deprived the employer of something of value. But the evidence at trial showed that the defendants were interested in receiving standard annual raises and end-of-year bonuses that were based on the bank’s overall financial condition, not on any specific metric they falsified to obtain additional compensation. In practice, that seems little different from deceiving an employer about working productively. In any event, the government’s argument to the jury did not distinguish between the maintenance of the defendants’ existing salaries and the receipt of an increased salary or bonus. As the government presented the case, it was effectively an honest-services case dressed in the garb of salary deprivation.
[T]he fraudulent diversion of a bank’s funds for unauthorized purposes certainly could be the basis for a conviction under section 1344.
[E]ven assuming that the bank-funds theory was presented to the jury and was valid, we still must overturn the conspiracy conviction because the government’s reliance on the accurate-information and salary-maintenance theories was not harmless. As we have explained—and as the government concedes with respect to the accurate-information theory—both theories were legally invalid. The Supreme Court has held that “constitutional error occurs” when a jury “returns a general verdict that may rest on a legally invalid theory.”
Significantly, the jury returned a split verdict and deliberated for four days—facts that weigh against a finding of harmless error.
Bank executives considering engaging in fraud should take no comfort from this result. Our decision in no way limits the scope of sections 1344 and 1349 or the government’s ability to bring prosecutions under those statutes. We hold only that when the government devotes the bulk of its presentation to two legally invalid theories of guilt—the most prominent of which, it bears repeating, the government now admits was invalid—we will not affirm a general verdict simply because, had we been on the jury, we might have found the defendants guilty on a third theory.
Nor is there any basis for remanding to give the government an opportunity for a do-over after it made the strategic choice not to address all of the defendants’ arguments in its appellate brief.
“[W]hen a statement is literally true, it is, by definition, not false and cannot be treated as such . . . , no matter what the defendant’s subjective state of mind might have been.” United States v. Aquino, 794 F.3d 1033, 1036 (9th Cir. 2015) (first alteration in original) (quoting United States v. Castro, 704 F.3d 125, 139 (3d Cir. 2013)). Even if a transaction “is a part of a fraudulent or otherwise illegal scheme,” it is not false to report it as it occurred. Erickson, 601 F.2d at 302.
