Brewster v. U.S., 07-14205-CIV.

Decision Date14 May 2008
Docket NumberNo. 07-14205-CIV.,07-14205-CIV.
PartiesDavid BREWSTER, Petitioner, v. UNITED STATES of America, Respondent.
CourtU.S. District Court — Southern District of Florida

David Kelly Brewster, Zephyrhills, FL, pro se.

Heidi L. Bettendorf, Attorney General's Office, West Palm Beach, FL, for Department of Corrections James McDonough.

ORDER PARTIALLY ADOPTING REPORT OF MAGISTRATE JUDGE; DENYING MOTION UNDER § 2254 TO VACATE, SET ASIDE, OR CORRECT SENTENCE

K. MICHAEL MOORE, District Judge.

THIS MATTER came before the Court upon Plaintiff David Brewster's Motion to Vacate, Set Aside, or Correct Sentence under 28 U.S.C. § 2254 (dkt # 5).

THIS MATTER was referred to the Honorable Patrick A. White, United States Magistrate Judge. Magistrate Judge White issued a Report and Recommendation (dkt # 33), recommending that the motion be denied. Objections were filed on April 30, 2008 (dkt # 36).

UPON CONSIDERATION of the Report and Recommendation, after a de novo review of the record, and being otherwise fully advised in the premises, the Court enters the following Order.

I. BACKGROUND

Petitioner David Brewster ("Brewster") was convicted under Florida's bank fraud statute, § 655.0322(6), for passing three bad checks. The checks were associated with an account Brewster held at SunTrust Bank ("SunTrust") that was closed in March of 2002, a number of months before Brewster passed the bad checks. Brewster gave the first check to Perry Wright in the amount of $1475 for a deposit on a condominium rental. Brewster gave the second check for $190 to Mary Mazzarella in August of 2002 for a storage unit rental. The third check was given to Nancy Sapey in the amount of $2200 for a deposit on a condominium rental. Brewster was subsequently convicted of violating Florida's bank fraud statute and was sentenced as a habitual offender to seven years imprisonment followed by eight years of probation.

A detailed account of the procedural history was included in Judge White's Report and Recommendation (dkt # 33) and is incorporated herein by reference.

II. ANALYSIS

Section 655.0322(6), Florida Statutes, states, in relevant part:

Any person who knowingly executes, or attempts to execute, a scheme or artifice to defraud a financial institution ... or 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, is guilty of a felony of the second degree.

§ 655.0322(6), Fla. Stat. Florida's appellate courts have never had occasion to interpret this statute.

However, § 655.0322(6), Fla. Stat., was modeled on the federal bank fraud statute, 18 U.S.C. § 1344. Section 1344 states, in relevant part:

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.

18 U.S.C. § 1344. The federal bank fraud statute was enacted to "protect [] the financial integrity of [financial] institutions, and ... assure a basis for Federal prosecution of those who victimize these banks through fraudulent schemes." U.S. v. Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992) (quoting S.Rep. No. 225, 98TH CONG., 2d Sess. 377 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3517). In the wake of the savings and loan debacle, most members of Congress singled out bank fraud as a primary contributing cause. See Heidi Huntington Mayor et al., Financial Institutions Fraud, Ninth Survey of White Collar Crime, 31 Am.Crim. L.Rev. 647, 649-50 (1994). Upon passage of the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), there was little opposition to dramatically increasing criminal penalties for bank fraud. Id. The maximum fine was increased from $10,000 to $1,000,000 and the maximum prison sentence was increased from five to twenty years (later increased to thirty years). Id.

Section 1344 has been utilized to punish activities including "check-kiting, check forging, false statements on loan applications and in negotiations with banks, sales of stolen checks, unauthorized automatic teller machine use, credit card fraud, bank mail theft, student loan fraud, and bogus transactions between offshore `shell' banks and domestic banks." Mayor, supra, 31 Am.Crim. L.Rev. at 652-53 (internal citations omitted). As reflected by the language of both § 1344 and § 655.0322(6), Fla. Stat., these statutes establish two distinct offenses, differentiated by the type of scheme or artifice required. The scheme or artifice employed must either seek to (1) defraud a financial institution, or (2) seek to obtain the financial institution's moneys, funds, etc., by means of false or fraudulent pretenses, representations, or promises.

Section 1344 has been used extensively to prosecute check-kiting, which involves the "continuous interchange of worthless checks between at least two accounts at separate banks and involves covering overdrafts with deposits of checks creating overdrafts at other banks." Henry J. Bailey & Richard B. Hagedorn, Brady on Bank Checks: The Law of Bank Checks, § 19.08.1 Federal courts have held that check-kiting constitutes a violation of § 1344(1) because its purpose is to defraud the bank by deceiving it into distributing funds based on the mistaken belief that a demand is supported by adequate funds. See U.S. v. Frydenlund, 990 F.2d 822, 824 (5th Cir.1993); U.S. v. Sayan, 968 F.2d 55, 61 n. 7 (D.C.Cir.1992); U.S. v. Doherty, 969 F.2d 425, 429 (7th Cir.1992); U.S. v. Stone, 954 F.2d 1187, 1189-91 (6th Cir. 1992); U.S. v. Falcone, 934 F.2d 1528, 1540 (11th Cir.1991) (per curiam), reh'g granted & opinion vacated, 939 F.2d 1455 (11th Cir.1991), opinion reinstated, on reh'g, 960 F.2d 988 (11th Cir.) (en banc); U.S. v. Fontana, 948 F.2d 796, 802 (1st Cir.1991); U.S. v. Celesia, 945 F.2d 756, 758-59 (4th Cir.1991); U.S. v. Schwartz, 899 F.2d 243, 246-47 (3d Cir.1990); U.S. v. Bonnett, 877 F.2d 1450, 1454-56 (10th Cir. 1989).

Courts have also held that check-kiting does not constitute a violation of 1344(2) because depositing a check unsupported by sufficient funds that is otherwise legitimate is not a fraudulent representation, given that a check makes no representation as to the sufficiency of the funds on which it is drawn. U.S. v. LeDonne, 21 F.3d 1418, 1425-26 (7th Cir.1994); U.S. v. Falcone, 934 F.2d 1528, 1540 (11th Cir. 1991) (per curiam), reh'g granted & opinion vacated, 939 F.2d 1455 (11th Cir.1991), opinion reinstated on reh'g, 960 F.2d 988 (11th Cir.) (en banc); U.S. v. Celesia, 945 F.2d 756, 758 (4th Cir.1991); U.S. v. Medeles, 916 F.2d 195, 199-200 (5th Cir.1990); U.S. v. Cronic, 900 F.2d 1511, 1516 (10th Cir.1990) see U.S. v. Ragosta, 970 F.2d 1085, 1088-89 (2d Cir.1992); see also Williams v. United States, 458 U.S. 279, 284-85, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982) (finding that depositing a check drawn on insufficient funds is not a false statement because the check does not "make any representation as to the state of the account holder's bank balance").

Although the federal bank fraud statute has been relied on extensively in check-kiting cases, it is not applicable to ordinary cases of passing bad checks. U.S. v. Brandon, 298 F.3d 307, 313 (4th Cir.2002) (stating that "a routine bad check case does not come within the scope of § 1344 ... [where] the drawee bank refuses to honor the check for lack of sufficient funds"); U.S. v. Jacobs, 117 F.3d 82, 92-93 (2d Cir.1997) (stating that a scheme to pass bad checks is not bank fraud under § 1344); U.S. v. Cavin, 39 F.3d 1299, 1308 (5th Cir.1994) (stating that writing a bad check does not constitute bank fraud); U.S. v. Orr, 932 F.2d 330, 332 (4th Cir.1991) (stating that § 1344 was not intended to create a federal bad check law).

However, while bank fraud cannot arise solely from passing bad checks, bank fraud may be based on passing bad checks if there are (1) additional facts evincing a scheme to defraud a financial institution or to obtain its assets by false or fraudulent pretenses, and (2) risk of loss to the financial institution. See U.S. v. Reaume, 338 F.3d 577, 582 (6th Cir.2003). When "the drawer has simply overdrawn the account, the government must present other facts evincing an intent to victimize the financial institution to sustain a bank fraud charge under § 1344." U.S. v. Morganfield, 501 F.3d 453, 465 (5th Cir.2007) (quotation marks omitted) (finding bank fraud where, in addition to passing bad checks, defendants presented banks with false business certificates, false identification, and signed checks in the name of non-existent individuals); U.S. v. Reaume, 338 F.3d 577, 579-580 (6th Cir.2003) (finding bank fraud where defendants passed bad checks from accounts they had established by providing false identifications to the bank); U.S. v. Antonelli, 2000 WL 1205993, at *1, 234 F.3d 1274 (7th Cir.2000) (finding bank fraud where defendants passed bad checks from accounts set up by giving banks bogus names, falsified, identifications and fictitious social security numbers); U.S. v. Jacobs, 117 F.3d 82, 92-93 (2d Cir.1997) (finding bank fraud where defendant sold fictitious certified drafts to third-parties with instructions that they present the fictitious drafts to their banks in exchange for discharge of their debts).

Bank fraud also requires that the scheme or artifice be executed knowingly. 18 U.S.C. § 1344. In cases where passing bad checks has been found to constitute bank fraud because there are additional facts evincing a scheme to defraud a financial institution, courts have relied on risk of loss to the financial institution...

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