USA v. Adekoya

2015 DNH 039P

• Court: District Court, D. New Hampshire
• Decided: March 2, 2015
• Docket: CR-13-98-JL
• Status: Published

Opinion

UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

United States of America

v. Criminal No. 13-cr-98/01-JL Opinion No. 2015 DNH 039P Olawaseun Adekoya

MEMORANDUM ORDER

This case raises a question as to the proof required to

secure a conviction for bank fraud under 18 U.S.C. § 1344. The

defendant, Olawaseun Adekoya, was among the targets of a sting

operation conducted by the United States Secret Service. A

Secret Service agent, impersonating as an associate of Adekoya’s,

wrote an e-mail to Adekoya inviting him to participate in an “ATM

cashout,” a scheme using fraudulently manufactured ATM cards to

make unauthorized withdrawals from actual bank accounts. Adekoya

took the bait, and recruited four other people to assist him.

Those four traveled from Georgia to New Hampshire, where they

retrieved 200 plastic cards, which they had been led to believe

were encoded to access ATMs, from a prearranged drop point.

Unbeknownst to them–-and to Adekoya--the cards, which had been

supplied by the Secret Service, were blank and incapable of

actually withdrawing any cash. All four were caught red-handed

when they attempted to use the cards; Adekoya was arrested the

next day. Adekoya was tried in this court on charges of bank fraud,

see 18 U.S.C. § 1344, and conspiracy to commit bank fraud, see

id. §§ 371 & 1344. After the prosecution closed its evidence,

Adekoya orally moved for a judgment of acquittal on both counts.

See Fed. R. Crim. P. 29(a). He argued, among other things, that

a bank fraud conviction requires proof by the prosecution that a

bank was actually victimized or exposed to a risk of loss.

Because the cashout had been devised by the Secret Service and

the plastic cards were incapable of actually withdrawing funds,

Adekoya asserted, the prosecution had failed to prove that any

bank was victimized, or that such a risk existed. The court

denied the motion in part, but reserved decision on Adekoya’s

“actual victimization or risk of loss” argument on the bank fraud

count. See Fed. R. Crim. P. 29(b). After the jury returned a

verdict finding Adekoya guilty on both counts, the court received

supplemental written briefing from the parties regarding that

argument. Having reviewed that briefing, the court now denies

Adekoya’s motion.

As explained below, although Adekoya relies on cases stating

that the prosecution must prove that a bank “was victimized or

exposed to a risk of loss” in order to secure a conviction under

§ 1344, see, e.g., United States v. Brandon, 17 F.3d 409, 427

(1st Cir. 1994), he misinterprets those cases. They do not mean,

as Adekoya argues, that a defendant cannot be convicted of bank fraud where, as here, his scheme to defraud has no hope of

succeeding, and thus does not put a bank at actual risk of loss.

To the contrary, those cases stand for the proposition that a

bank fraud conviction requires proof of a scheme--whether or not

it is actually capable of success–-that would, if realized,

victimize a bank (as opposed to a third party) or put it at risk

of loss. Because the evidence presented at trial proved as much,

Adekoya’s motion is denied.

I. Background1

The case against Adekoya resulted from a United States

Secret Service investigation into a wholly different person, Hieu

Minh Ngo. The Secret Service arrested Ngo for selling personally

identifiable information (“PII”) belonging to other individuals,

and Ngo, facing a lengthy term of imprisonment, agreed to assist

in further investigations into the people who had purchased PII

from him. To that end, Ngo authorized the Secret Service to both

access and use the e-mail account he had used to correspond with

his “customers.” In the account, the Secret Service discovered

correspondence between Ngo and Adekoya, in which Adekoya sought

to purchase the Social Security numbers of numerous individuals.

1 This summary, which briefly reviews the facts relevant to Adekoya’s Rule 29 motion, examines the evidence presented at trial “in the light most favorable to the government, taking all reasonable inferences in its favor.” United States v. Pagán-Ferrer, 736 F.3d 573, 590 (1st Cir. 2013). A more complete discussion of the background of this case can be found in the court’s opinion denying Adekoya’s motion to suppress. See United States v. Adekoya, –- F. Supp. 3d –-, 2014 WL 5844239, *2-3 (D.N.H. Nov. 12, 2014). Using this information, the government obtained an indictment

against, and an arrest warrant for, Adekoya in this court.

The Secret Service was faced with something of a quandary,

however. In his dealings with Ngo, Adekoya did not use his real

name; the Secret Service had been able to identify him by tracing

the IP address from which the correspondence with Ngo originated

to Adekoya’s residence in New Jersey. Suspecting that Adekoya

might, in light of this state of affairs, attempt to claim that

someone else had employed his IP address to correspond with Ngo,

the Secret Service formulated a plan to prove beyond any doubt

that it was, in fact, Adekoya on the other end of Ngo’s e-mails.

A Secret Service agent, impersonating Ngo, wrote an e-mail

from Ngo’s account to one of the accounts that originated from

Adekoya’s IP address, inviting the recipient to participate in an

ATM cashout in New Hampshire. (As already mentioned, that type

of scheme involves using fraudulently manufactured ATM cards to

make withdrawals from legitimate bank accounts belonging to other

people.) In extending this invitation, the agent hoped to lure

Adekoya from his home in New Jersey to New Hampshire, where he

would be arrested--and his ability to disclaim responsibility for

the correspondence with Ngo would be eliminated.

Adekoya readily accepted the invitation, and he and the

agent masquerading as Ngo proceeded to hammer out the specifics

of the plan through e-mails and instant messages. Adekoya would assemble a group of people and travel with them to Manchester,

New Hampshire on the evening of October 1, 2013. There, they

would proceed to the front desk of a local hotel and retrieve a

box left for them by “Ngo.” That box would contain a list of

twelve ATMs to be targeted, 200 plastic cards that would enable

them to make withdrawals from those ATMs, and the PIN numbers to

be used in conjunction with those cards. They would then make

withdrawals totaling about $900,000–-a portion of which they

would keep, the other portion of which would go to “Ngo”–-before

returning home.

As planned, four individuals traveled from Atlanta, Georgia

to Manchester, New Hampshire on the evening of October 1, 2013,

and picked up the box containing the lists of ATMs, cards, and

PIN numbers. In a departure from the plan discussed by “Ngo” and

Adekoya, Adekoya was not among them. And, in a further departure

from that plan, the 200 plastic cards that “Ngo” had provided

could not be used to withdraw cash from the ATMs. That was, of

course, the Secret Service’s plan all along, but it was not

apparent to Adekoya’s co-conspirators, who continued on their way

to the specified ATMs. All four were arrested in the early

morning hours of October 2, 2013, while unsuccessfully attempting

to make withdrawals using the cards.

Adekoya was arrested at his home the next day, after his co-

conspirators implicated him in the scheme. Based upon the events of October 1-2, 2013, he was charged with bank fraud, in

violation of 18 U.S.C. § 1344, and conspiracy to commit bank

fraud, in violation of 18 U.S.C. §§ 371 & 1344.2

II. Analysis

Adekoya asserts that the foregoing facts are insufficient to

prove his guilt on the charge of bank fraud under 18 U.S.C. §

1344. That statute provides for the punishment of

[w]hoever 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[.]

Adekoya’s argument does not focus on the language of the

statute itself. It instead relies upon case law from both within

and without this circuit to the effect that “the government must

also establish that a federally insured bank . . . was victimized

or exposed to a risk of loss by the scheme to defraud” in order

to secure a conviction under the statute. Brandon, 17 F.3d at

427 (citing United States v. Blackmon, 839 F.2d 900, 906 (2d Cir.

1988)); see also, e.g., United States v. Moran, 312 F.3d 480, 489

(1st Cir. 2002) (“[T]he bank need not be the immediate victim of

2 After some pretrial wrangling, the government voluntarily chose not to pursue the charges against Adekoya set forth in the original indictment, which had been based on his attempts to purchase PII from Ngo. the fraudulent scheme and need not have suffered actual loss so

long as the requisite intent is established and the bank was

exposed to a risk of loss.”); United States v. Lemons, 941 F.2d

309, 315-16 (5th Cir. 1991) (“[T]he government had to prove . . .

that at least one of the banks was at risk.”). Because the

plastic cards the Secret Service provided his co-conspirators as

part of the sting operation “were incapable of withdrawing money

from an ATM and were, in fact, nothing more than pieces of

plastic,” Adekoya says the prosecution has failed to carry its

burden of showing that any bank was victimized, or even exposed

to a risk of loss. The court does not agree with this reading of

the case law.

Adekoya’s argument takes that case law out of context. To

explain that context, the court begins with the statute itself.

As the disjunctive “or” between subsections (1) and (2) suggests,

a defendant may commit the crime of bank fraud in either of two

ways. See Loughrin v. United States, 134 S.Ct. 2384, 2391

(2014). A defendant violates the first of the two subsections by

(1) engaging in a scheme or artifice to defraud (2) a federally

insured financial institution, and (3) doing so knowingly and

with the intent to defraud the financial institution. See United

States v. Benjamin, 252 F.3d 1, 5 (1st Cir. 2001) (quoting

Brandon, 17 F.3d at 424). The second subsection, by contrast, is

violated when the defendant (1) engages in a scheme or artifice employing materially false and fraudulent pretenses to (2) obtain

money or other property owned by, or under the custody or control

of (3) a federally insured financial institution, and (4) does so

knowingly. See Benjamin, 252 F.3d at 5; see also United States

v. Bah, — Fed. Appx. —, 2014 WL 5438380, *1 (4th Cir. Oct. 28,

2014) (discussing elements of offense post-Loughrin).

A number of courts have recognized that if the statute, and

the elements of the offenses it defines (and in particular the

variant outlined in subsection (2)), are read broadly, they could

encompass a wide variety of fraudulent schemes that only

tangentially involve banks.3 By way of example, in one Seventh

Circuit case, a jury convicted the defendant of bank fraud for

submitting a fraudulent tax return to the IRS, depositing the

resultant tax refund check into an account opened in the name of

a nonexistent company, and writing checks on the account. United

States v. Davis, 989 F.2d 244, 246 (7th Cir. 1993). Similarly,

in a Second Circuit case–-the very first appellate case, in fact,

to have articulated the concept that a bank must be “victimized

or exposed to a risk of loss” for § 1344 to apply–-a jury

convicted the defendants of bank fraud for their participation in

a scheme in which unwitting victims were, by means of deception,

induced to withdraw their own money from banks and turn it over

3 Throughout this order, the court uses the shorthand “bank” to refer to a federally insured financial institution, since that is the term used in the case law upon which Adekoya relies. to the defendants. Blackmon, 839 F.2d at 902-03. In both cases,

the courts noted that although no bank stood to lose any money or

property as a result of the defendants’ schemes, a broad reading

of the statute would nonetheless encompass those schemes, which

had either deceived banks or employed deception to obtain funds

in bank custody. Davis, 989 F.2d at 246; Blackmon, 839 F.2d at

904-05.

That broad reading, however, struck those courts (and others

confronted with similar facts) as incorrect. While this court is

not typically inclined to look outside the text of a statute for

its purpose, the Davis and Blackmon courts were not so reserved.

The purpose of the statute, both courts concluded, is not to

protect third parties who are victimized by fraudsters and con

artists in schemes utilizing banks in some way, but to protect

federally insured financial institutions from those schemes, and,

by so doing, protect the federal government’s interest as an

insurer of those institutions. See Davis, 989 F.2d at 246-47;

Blackmon, 839 F.2d at 905. So, to distinguish the former type of

case from the latter, those courts articulated the requirement on

which Adekoya now rests his argument for acquittal, i.e., that a

bank itself must be “victimized,” Blackmon, 839 F.2d at 904, or

“put at risk,” Davis, 989 F.2d at 247, by the scheme. As the

Court of Appeals for the Third Circuit succinctly summarized:

[W]here the bank is not the ‘target of deception,’ but rather an ‘unwitting instrumentality,’ there is the additional concern that § 1344 may be applied in a manner that reaches conduct that falls well beyond the scope of what the statute was intended to regulate. . . . [T]he deception of a bank as an incidental part of a scheme primarily intended to bilk a bank customer does not undermine the integrity of banking. Thus, to ensure that § 1344 [is] not applied to conduct falling outside the scope of the bank fraud statute, we imposed the additional requirement of proof of an intent to cause a bank a loss or potential liability.

United States v. Leahy, 445 F.3d 634, 647 (3d Cir. 2006)

(internal quotation marks and citations omitted; see also United

States v. De La Mata, 266 F.3d 1275, 1298 (11th Cir. 2001) (“Our

review of the cases reveals that courts apply the risk of loss

analysis in determining whether a scheme [that is] primarily

directed at a non-bank party can still give rise to bank

fraud.”).4

In short, then, when these (and other) cases remark that a

conviction for bank fraud requires that a “bank was victimized or

exposed to a risk of loss by the scheme to defraud,” the idea

they are communicating is that a defendant’s scheme, if realized,

must threaten to harm a bank–-as opposed to some other, unrelated

party–-in some way, either directly or indirectly. These cases

do not graft onto the statute the additional requirement that

4 Indeed, in the memorandum he submitted in support of his Rule 29 motion, Adekoya himself observes that “one reason that certain Courts required a showing of risk of loss, was to ensure that the fraud was directed at a bank, not at some third party victim that was not a financial institution.” Memo. in Supp. of Rule 29 Mot. (document no. 103) at 6, ¶ 20 (citing Blackmon, 839 F.2d at 904). The remainder of the memorandum does not identify any other potential reason for those courts’ holdings, nor does it comment upon (or even acknowledge) the significance of this reason. Adekoya seems to claim that they do, i.e., that the defendant’s

scheme actually must be capable of victimizing a bank or exposing

it to a risk of loss. And a survey of the numerous cases Adekoya

cites makes this clear: not a single one holds that a conviction

under § 1344 cannot stand because the defendant’s scheme did not

create a risk of loss at all, but several overturn convictions

under § 1344 because the risk of loss from the defendant’s scheme

fell on a third party rather than a bank. See, e.g., United

States v. Staples, 435 F.3d 860, 867 (8th Cir. 2006) (reversing

conviction because “the entire loss caused by the fraudulent

conduct was suffered by the title companies,” and “the banks

involved . . . were merely instrumentalities used to used to cash

legitimate checks written by the title companies”); United States

v. Laljie, 184 F.3d 180, 191 (2d Cir. 1999) (similar).

To summarize: assuming that the cases which remark that the

prosecution must prove that a “bank was victimized or exposed to

a risk of loss by the scheme to defraud” to obtain a conviction

under § 1344 correctly reflect the current state of a law,5 those

5 The court notes that the Supreme Court’s ruling in Loughrin may create some doubt as to the continuing validity of the entire line of case law holding that a conviction under § 1344 requires proof that a bank was victimized or exposed to a risk of loss by the defendant’s scheme (at least insofar as that case law suggests that the defendant’s intent to defraud a bank is an element of the crime defined by § 1344(2), a suggestion Loughrin rejected). Because Adekoya misreads that case law in any event, as just discussed at length, the court does not consider here Loughrin’s effect on them. It is similarly unnecessary to determine whether the “risk of loss” analysis applies to bank fraud charges brought under § 1344(1), those brought under § 1344(2), or those brought under either subsection of the statue, an issue on which the cases are not unanimous. cases require only that the scheme to defraud, whether or not it

is actually capable of success, would victimize a bank or expose

it to risk of loss. It is well-established in the case law that

this requirement is satisfied where, as here, the defendant’s

scheme involves fraudulently withdrawing funds from the accounts

of innocent depositors, as the bank may ultimately bear those

losses (either in the form of civil liability or through a

practice of reimbursing customers for the withdrawn funds). See,

e.g., United States v. Miller-Douglas, 146 Fed. Appx. 576, 581 &

n.6 (3d Cir. 2005); United States v. Bonallo, 858 F.2d 1427, 1434

n.9 (9th Cir. 1988). Adekoya’s Rule 29 motion is accordingly

denied.

III. Conclusion

For the foregoing reasons, the defendant’s oral motion for a

judgment of acquittal is DENIED.

SO ORDERED.

Joseph N. Laplante United States District Judge

Dated: March 2, 2015

cc: Arnold H. Huftalen, Esq. Theodore M. Lothstein, Esq.