U.S. v. Medeles

• Decision Date: 17 October 1990
• Docket Number: No. 90-8046,90-8046
• Citation: 916 F.2d 195
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Daniel A. MEDELES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 195

916 F.2d 195

UNITED STATES of America, Plaintiff-Appellee, v. Daniel A. MEDELES, Defendant-Appellant.

No. 90-8046.

United States Court of Appeals, Fifth Circuit.

Oct. 17, 1990.

Michael S. McDonald, Asst. Federal Public Defender, and Lucien B. Campbell, Federal Public Defender, El Paso, Tex., for defendant-appellant.

LeRoy M. Jahn, Krista L.S. Leinenkugel, Asst. U.S. Attys. and Ronald F. Ederer, U.S. Atty., San Antonio, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before RUBIN, GARWOOD, and HIGGINBOTHAM, Circuit Judges.

GARWOOD, Circuit Judge:

Defendant-appellant Daniel A. Medeles (Medeles) appeals his conviction for executing or attempting to execute a scheme to obtain money from a federally insured financial institution by means of false or fraudulent pretenses or representations, contrary to former 18 U.S.C. Sec. 1344(a)(2). For the section 1344(a)(2) element of pretense or representation, the government charged and proved only that Medeles knowingly wrote insufficient funds checks on his checking account at a federally insured institution and deposited those checks in his checking accounts at other financial institutions to cover other checks he had written on the latter accounts and which, but for such deposits, would have overdrawn those accounts. Medeles contends that this does not suffice to establish that he made any misrepresentation or pretense, as the unembellished depositing of a check is not of itself a representation that the bank account on which it is drawn has a sufficient balance to cover it. We agree, and accordingly reverse.

Facts and Proceedings Below

Medeles engaged in a check kiting scheme from September 1 to September 8, 1988. The scheme involved three federally insured banks in the El Paso, Texas metropolitan area--MBank, Government Employees Credit Union (GECU), and Merabank--at each of which Medeles maintained a checking account. Medeles initiated his scheme by depositing four checks totaling $1,520 in his MBank checking account. These checks were drawn on his GECU checking account, which had a balance of $263.38. To cover the overdraft, Medeles deposited checks in the amount of $1,425 in the GECU account. These checks were drawn on his MBank account, which also had insufficient funds. Medeles then deposited three checks totaling $1,632--drawn on his GECU account--in his MBank account. This rotation, which ultimately also involved Medeles' account at Merabank, continued until September 8, when Medeles withdrew $3,700 from MBank and flew to Las Vegas for a gambling spree.

Medeles was indicted and convicted on three counts of bank fraud under former 18 U.S.C. Sec. 1344(a), which provided:

"(a) Whoever knowingly executes, or attempts to execute, a scheme or artifice--

"(1) to defraud a federally chartered or insured 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 federally chartered or insured financial institution by means of false or fraudulent pretenses, representations, or promises, shall be fined not more than $10,000, or imprisoned not more than five years, or both." ¹

Count one of the indictment alleged that, during the first fifteen days of September 1988, Medeles:

"[D]id knowingly and unlawfully devise a scheme for the purpose of obtaining moneys and property by means of false and fraudulent pretense and representations, to wit: Defendant wrote checks drawn on his checking account at MBank, whose deposits are insured by the Federal Deposit Insurance Corporation, which did not have a sufficient balance in that account to cover those checks and deposited these same checks into other El Paso area financial institutions in order to cover checks which had been written on those accounts, in violation of Title 18, United States Code, Section 1344."

Counts two and three are worded identically to count one, except only that the count one words, "MBank, whose deposits are insured by the Federal Deposit Insurance Corporation," are replaced, in count two by "the Government Employees Credit Union, whose deposits are insured by the National Credit Union Administration Board," and in count three by "the Merabank, whose deposits are insured by the Federal Savings and Loan Insurance Corporation."

Although the indictment does not specify whether the offense charged is a violation of clause (1) or clause (2) of former section 1344(a), we agree with Medeles, and the government concedes, that conviction may be sustained, if at all, only under clause (2), as the indictment does not allege, and the charge did not require the jury to find, any intent or purpose to "defraud" a federally chartered or insured financial institution, and indeed the charge was solely in the language of clause (2). ²

Aside from Medeles' writing and depositing, in his checking accounts, insufficient funds checks drawn on other accounts of his, there is no evidence or allegation that Medeles made any representation or pretense. Medeles, who moved for judgment of acquittal at the close of the government's case and again at the close of all the evidence, contends on appeal that the evidence is accordingly insufficient to sustain his conviction on any of the counts because it does not establish the "false or fraudulent pretenses, [or] representations" element of former section 1344(a)(2). ³

Discussion

As the language and structure of former section 1344(a) reflect, it establishes two different offenses, though each shares common elements (and may otherwise somewhat overlap). Each offense is one against "a federally chartered or insured financial institution" and each has the primary element of "knowingly executes, or attempts to execute, a scheme or artifice." The difference between the two offenses lies in what the scheme or artifice against the institution must consist of. For the first offense, defined in clause (1), the denounced scheme or artifice has but a single required element, namely, that it be one "to defraud" the institution. For the second offense, defined in clause (2), the proscribed scheme or artifice is not characterized as one "to defraud" but rather is described as having two somewhat different required elements, namely: first, that it be "to obtain any of the moneys, funds, credits, assets, securities or other property owned by or under the custody or control of" the institution; and second, that it be to do so "by means of false or fraudulent pretenses, representations, or promises." See United States v. Bonnett, 877 F.2d 1450, 1453-54 (10th Cir.1989). ⁴

Here, as previously noted, we deal only with the clause (2) offense. What Medeles challenges is the sufficiency of the evidence to establish the second element--false or fraudulent pretenses or representations--of that offense. ⁵ The government concedes that the only evidence of any false or fraudulent pretense or representation is Medeles' deposit in his account at one bank of checks drawn on his account in another bank knowing that the account on which the checks were drawn had insufficient funds to cover those checks. In essence, the government's position is that the mere deposit of a check into one's bank account, drawn on the depositor's account in another bank, is a representation that there are sufficient funds in the account on which the check is drawn to pay it; or, at least, that repeated such deposits by a given individual amount to such a representation. Medeles argues to the contrary, relying principally on Williams v. United States, 458 U.S. 279, 102 S.Ct. 3088, 73 L.Ed.2d 767 (1982). Williams also involved a check kiting scheme. The defendant there was charged under 18 U.S.C. Sec. 1014, which applies to "[w]ho[m]ever knowingly makes any false statement or report, or willfully overvalues any land, property or security...." The Supreme Court held that the depositing of checks the defendant knew were not supported by sufficient funds was not conduct that involved the making of a false statement (or a willful overvaluation) under the statute. Williams, 102 S.Ct. at 3091.

In Williams, the only false statement alleged by the government was the defendant's presentation of a check to a bank and the assertedly therein implicit representation that the check was covered by sufficient funds. The Court stated that "each individual count of the indictment in this case stated only that petitioner knowingly had deposited a single check that was supported by insufficient funds, not that he had engaged in an extended scheme to obtain credit fraudulently." Id. at 3093 (footnote omitted). The government argues that Williams stands for the proposition that whereas the depositing of a single check is not a representation, the depositing of multiple checks can be.

The government overlooks, however, language in Williams indicating that depositing multiple insufficient funds checks likewise is not a representation. Williams states that "[a]lthough petitioner deposited several checks that were not supported by sufficient funds, that course of conduct did not involve the making of a 'false statement,' for a simple reason: technically speaking, a check is not a factual assertion at all, and therefore cannot be characterized as 'true' or 'false.' " Id. at 3091 (emphasis added); see United States v. Cronic, 900 F.2d 1511, 1515 (10th Cir.1990) (holding under mail fraud statute that if a single insufficient funds check does not constitute a misrepresentation, then a series of checks cannot either; "[t]hat is, any multiple of zero is zero.")

Moreover, the Williams language relied on by the government appears in the same paragraph as the Court's criticism of a construction which would allow conviction for knowing deposit of an insufficient funds check "whether or not the drawer had an intent to defraud." Id. 102 S.Ct. at 3092. ⁶ In light of the fact that clause (1)...