United States v. Kenrick

2000 | Cited 0 times | First Circuit | February 22, 2000


Albert Kenrick and Derek Ober appeal from judgments of conviction entered after a jury trial in the United States District Court for the District of Massachusetts. The jury found Kenrick guilty of one count of bank fraud and Ober guilty of four counts of bank fraud and one count of perjury. They argue, for the first time on appeal, that the district court erred by instructing the jury that it could convict them of bank fraud without finding that they intended to cause harm to the bank. We agree that the instructions misstated the law because a bank fraud conviction requires intent to harm a bank in its property rights, but we conclude that there was no plain error warranting reversal. We also reject both defendants' challenges to the sufficiency of the evidence, as well as sundry arguments raised by Ober. We therefore affirm the convictions.


We recite the facts in the light most favorable to the jury's verdict. See United States v. Escobar-de Jesus, 187 F.3d 148, 157 (1st Cir. 1999). In 1986, at the height of "New England's late, lamented real estate boom," United States v. Lilly, 983 F.2d 300, 302 (1st Cir. 1992), Derek Ober was the president of the Wakefield Cooperative Bank ("WCB" or "the bank") in Wakefield, Massachusetts. WCB is a state-chartered bank that has been insured by the FDIC since January 1986. Albert Kenrick, a real estate investor with substantial property in eastern Massachusetts, who had done business with WCB in the past, had an incentive to sell real estate in which he had large gains before January 1, 1987, because of a pending increase in capital gains taxes.

A. 222 Stackpole Street

Among Kenrick's properties was an eighteen-unit apartment building at 222 Stackpole Street in Lowell, Massachusetts. Kenrick discussed with Emily Flynn, a real estate broker whom he had dated in the past, the possibility of converting the building to condominiums and having Flynn sell them for him. Possibly contemplating the tax advantages of a sale before the end of 1986, however, Kenrick decided to sell the apartment building. Flynn had recently made a large profit on another condominium conversion, and she was interested in buying the Stackpole Street building with a partner. Although she wanted to have the same partner that she had had on her recent successful condo deal, Kenrick told her that Ober--whom Flynn had never met before--was interested in buying the property and that Kenrick preferred that Flynn and Ober purchase it as partners. On October 5, 1986, Flynn cooked a spaghetti dinner for Kenrick and Ober, and they negotiated a price for the Stackpole Street property of $935,000.

Flynn asked Ober where they could get financing for the purchase, and he answered, "Right here at this bank," i.e., WCB. Ober instructed Flynn that the loan application should be made in her name alone, even though they were equal partners, because he was going through a divorce. When she expressed doubt that she alone could qualify for such a large loan, he assured her that she could, and he filled out the application for her. Ober called John (Jay) Kimball, a lawyer who frequently represented WCB in mortgage transactions, and asked him to handle the paperwork for the Stackpole Street purchase. Kimball drafted the Riverview Development Trust, with Flynn as the trustee and only listed beneficiary, to hold title to the property. On Ober's instructions, Kimball also told Kenrick's attorney, who had drafted a purchase and sale agreement listing both Flynn and Ober as purchasers, that Flynn was to be listed as the only buyer.

An application for a $900,000 mortgage on the Stackpole Street property was filed with WCB. Pursuant to the standard procedure for mortgage applications at WCB, the applications went initially to Ober, who was both president and the bank's sole loan officer. The applications were then reviewed by two members of the Security Committee, a subcommittee of the Board of Directors, who set a value for the property, typically by visiting it themselves, without an outside appraisal. If approved by the Security Committee, loans would come before the Board of Directors at its monthly meeting for ratification. There was an unwritten policy that Board members should abstain from voting on loans in which they or their relatives had an interest.

Ober and another member of the Security Committee visited Stackpole Street, valued the property at $1,125,000, and recommended approval of the mortgage. The minutes of the Board of Directors meeting of November 26, 1986, indicate that the Board approved the Flynn loan. Three members of the Board, however, testified that the loan was never presented to them for a vote and that Ober never disclosed to them his interest in the property. An FBI document analyst testified that the entry in the Board minutes listing the loan was typed at a different time and with a different typewriter ball or wheel than the rest of the page.

The transaction closed on December 24, 1986. WCB provided a check for $900,000 and Flynn took title to the property as trustee of the Riverview Development Trust. Flynn herself provided the $50,000 down payment because Ober said he could not pay his half due to his pending divorce. The property was converted to condominiums, and seventeen of the eighteen units sold quickly, allowing Flynn to pay off the WCB loan in eight months. She shared the substantial profits equally with Ober, after repaying herself her contribution of his portion of the down payment. Ober assisted Flynn throughout the sales process, and managed to sell several units to friends and acquaintances, most of whom financed their purchases through WCB mortgages.

The eighteenth unit was harder to sell. Title to that unit was transferred to another trust prepared by Attorney Kimball, the D & E Realty Trust. Ober told Kimball that he had an interest in the unsold unit. Kimball therefore prepared two statements of beneficial interest for the trust, one listing Flynn as 100% beneficiary and the other listing Ober as 100% beneficiary; according to Flynn, they were equal partners in D & E as in Riverview. Ober was present when the trust was executed. He received half the net income from D & E and dealt with a condominium owner whose unit was damaged by flooding in the unit owned by D & E.

From the beginning of the transaction, Ober took steps to conceal his interest in 222 Stackpole Street. He arranged that Flynn should take title from Kenrick in her name only, as trustee of the Riverview Development Trust, and that she should be listed as the sole borrower on the $900,000 loan from WCB to purchase the property. Ober had a motive to conceal his interest because, as the jury was told, a loan of that nature to a bank officer was forbidden by Massachusetts law. See Mass. Gen. Laws ch. 170, § 19. 1 When Flynn was deposed by the attorney for the former Mrs. Ober, Ober instructed her to perjure herself by stating that he had no interest in the Stackpole Street property, and she did so. Before Flynn was questioned by the FBI, Ober told her, "I'll never admit to anything." Ober also denied his involvement in the Stackpole Street transaction at a 1991 WCB Board meeting.

B. 8-10 Emerson Street

At around the same time that he sold the Stackpole Street property, Kenrick sold a six-unit apartment building located at 8-10 Emerson Street in Wakefield to Chung Lee and her parents. The Lees were Korean immigrants who had formerly lived in a different building owned by Kenrick. They had purchased a two-family house on Willow Street in Melrose, Massachusetts in 1983. Kenrick, who was dating Chung Lee, told her that he could teach her how to make a million dollars by investing in real estate. He suggested to her that she and her parents buy his Emerson Street building for $325,000. He advised financing the purchase with two loans from WCB: first, a $150,000 refinancing of the mortgage on the Willow Street property, which would provide money for the down payment, and then a $260,000 mortgage on 8-10 Emerson Street.

Chung Lee filled out an application for the Willow Street refinancing and filed it at WCB, but it was not acted upon immediately; the original application was marked "Hold" in Ober's handwriting. After Kenrick met with Ober to negotiate the Stackpole Street sale, however, the refinancing was approved, with the commitment letter dated October 22, 1986. Kenrick himself filled out the application for the Lees' Emerson Street mortgage, and his appointment calendar indicated that he gave it to Ober personally on November 3, 1986. The Board of Directors ratified the Willow Street loan on November 26 and the Emerson Street loan on December 18. The sale of 8-10 Emerson Street closed on December 18.

As alleged by the government, there was evidence of a quid-pro-quo agreement between Kenrick and Ober that Kenrick would sell 222 Stackpole Street to Flynn and Ober and, in exchange, Ober would provide financing through the bank to allow Kenrick to sell 8-10 Emerson Street to the Lees. Following his spaghetti dinner meeting with Flynn and Ober on October 5, 1986, where they negotiated the Stackpole Street deal, Kenrick made a note that "I agreed at 935,000 to keep good rapport with Derek and thought with his financing ability & Emily's condo sales experience we could all be happy." In Kenrick's 1986 appointment calendar, otherwise filled with detailed notes for most days of the year, the page for October 4-6 is missing. Within three weeks of the October 5 meeting the loan to refinance the Lee family's property on Willow Street in Melrose, submitted to WCB in August and marked "Hold" in Ober's handwriting, had been approved; within two more weeks, the application for the $260,000 mortgage for the Lees to purchase 8-10 Emerson Street had been completed by Kenrick and delivered by him to Ober.

In addition, the agreement between Ober and Kenrick was testified to by Chung Lee. She testified that Kenrick told her, in explaining why he sold 222 Stackpole Street to Flynn and Ober, that "Mr. Ober can lend me the money because he's the Bank President. So, you know, that will work out very well." When asked what the relationship was between the Stackpole Street deal and Kenrick's sale of other properties, including 8-10 Emerson Street, she answered first, "Well, because if Bert [Kenrick] helps Derek Ober, Derek Ober can help Bert to sell other properties." When asked again what Kenrick had said about the relationship between the different deals, she answered:

Because Bert sold it to Derek, Stackpole Street, that's why he can sell his Tuttle Street commercial properties. And 8-10 Emerson Street, he can sell. And he can also sell Methuen property at 175 Haverhill Street, for I think, a million dollars or $900,000. I cannot remember. But he can sell that because Bert help Derek Ober to make money. That way, you know, he can help Bert later.

Chung Lee married Kenrick in October 1988 and was still married to him at the time of trial in October 1997, although divorce proceedings were then pending. She and her parents continued to own the Emerson Street property, but had to obtain an additional loan from WCB to cover cash flow problems. Eventually, after the tenants were forced to move out when Chung Lee (now Chung Kenrick) contaminated the building in attempting to remove lead paint, she defaulted on the mortgage and filed for bankruptcy. The bank wrote off a loss of $119,645.84 on the Emerson Street mortgage.

C. DGB Realty Trust

In September 1985, Ober formed the DGB Realty Trust with WCB Treasurer Glenn Gates and William Upton, a retired local police officer. DGB bought three condominium units in Hudson, Massachusetts, and financed the purchases through Greater Boston Bank. DGB lost money from the start, and its checking account at WCB soon contained insufficient money to pay the trust's bills. To cover the shortfall, Ober decided to issue a demand loan from WCB to DGB for $15,000 on December 4, 1986. On December 11, 1987, the amount of the demand loan was increased to $25,000. Although there was testimony that some bank employees, and possibly some members of the Board of Directors, knew of the interest of Ober and Gates in DGB, three directors testified that Ober did not disclose the demand loan to the Board. In January 1988 the DGB demand loan was paid off with the proceeds of a new demand loan in the name of William Upton. Although the new loan was in Upton's name alone, Ober and Gates were still each responsible for one-third of the debt. Ober and Upton paid off their shares, but Gates still owed money on his at the time of trial.

The demand loans did not turn DGB into a profitable venture, and on multiple occasions checks were written on DGB's account at WCB although there were insufficient funds to cover them. At that time WCB did not offer its customers overdraft protection or lines of credit. If a check was presented for payment with insufficient funds in the account, customers were typically allowed to make it good by depositing funds on the same day the check was presented; if they could not, the check bounced. Apparently checks were sometimes held for longer periods for bank employees or Board members. On Ober's instructions, however, DGB checks were held for unprecedented lengths of time, after the checks were paid and without sufficient funds in DGB's account to cover them. Fourteen checks, totaling over $36,000, were held for a total of 576 days; no checks bounced, and DGB payed no interest or fees. The last of these was the largest: check number 182, in the amount of $6,780.42, was presented for payment, and paid, on March 17, 1988, but there were insufficient funds in the DGB account to cover it until January 6, 1989.

D. Ober Deposition

The WCB Board of Directors fired Ober and Gates amid allegations of misconduct in 1991. In 1993, WCB brought an action against North American Specialty Insurance Company to recover on a fidelity bond for losses to the bank allegedly caused by the fraudulent conduct of Ober, Gates, and Attorney Kimball. The suit was brought in Massachusetts Superior Court and removed by the defendant to the United States District Court for the District of Massachusetts. As a part of discovery in that action, Ober, then living in Florida, was deposed under oath on March 10 and 11, 1994. Ober was asked, "Now, Mr. Kimball drew a realty trust entitled D, ampersand, E Realty Trust, D & E Realty Trust. Are you familiar with that?" He answered, "No." Ober was also asked, "Did you ever participate in the making of a loan where you had an undisclosed interest?" He again answered, "No."

E. Procedural History

A federal grand jury issued a twenty-two count indictment against Kenrick and Ober on December 18, 1996. The indictment charged Kenrick with conspiracy, 18 U.S.C. § 371, bank bribery, 18 U.S.C. § 215(a), and three counts of bank fraud, 18 U.S.C. § 1344. It charged Ober with conspiracy, bank bribery, seventeen counts of bank fraud, and two counts of perjury, 18 U.S.C. § 1623. The case was tried to a jury from September 15 to October 27, 1997. The jury found Kenrick guilty on one count of bank fraud and Ober guilty on four counts of bank fraud and one count of perjury. They were acquitted on all other counts. This appeal followed.


Kenrick and Ober argue that the district court erred by instructing the jury that it could convict them of bank fraud without finding that they intended to harm WCB. 2 Because they failed to raise this objection before the district court, we review for plain error. See United States v. Robbio, 186 F.3d 37, 42 (1st Cir. 1999); Fed. R. Crim. P. 52(b). We may reverse a conviction for plain error only if (1) there is an error; (2) it is plain, i.e., "obvious" or "clear under current law"; (3) it affected the outcome of the district court proceedings; and (4) it "seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings." United States v. Olano, 507 U.S. 725, 732-36 (1993).

The defendants were convicted of violating 18 U.S.C. § 1344, which, in the version effective in 1986, provided in pertinent part:

(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.

We have stated that the elements of bank fraud are "1) the defendant must engage in a scheme or artifice to defraud, or must make false statements or misrepresentations to obtain money from 2) a financial institution and 3) must do so knowingly." United States v. Blasini-Lluberas, 169 F.3d 57, 64 (1st Cir. 1999) (construing substantially identical present version of § 1344). 3

The defendants object to a portion of the district court's instruction defining a "scheme to defraud":

A scheme to defraud is ordinarily accompanied by a desire or a purpose to bring about some gain or benefit to one's self [sic] or some other person or by a desire or purpose to cause some loss to some other person. Here, there is not alleged-- effectively, there hasn't been any evidence offered- -that there was an intent to cause a loss to some other person. Here, we're dealing with allegations that there was to be some benefit to Mr. Ober, to Mr. Kenrick, or to people that Mr. Kenrick was concerned about.

The court also separately defined "intent to defraud": "To act with intent to defraud means to act wilfully with a specific intent to deceive or cheat or for the purpose of either causing some financial gain to another or one's self [sic]." One sentence in the instructions--the definition of "defraud" as "to deprive another of something of value by means of deception or cheating"--may have suggested that intent to harm was required. Reading these instructions in the context of the jury charge as a whole, see Robbio, 186 F.3d at 42, however, we agree that they allowed the jury to find the defendants guilty of bank fraud if they intended to deceive WCB and to enrich themselves or another person, without finding that they intended to harm WCB.

Whether a fraud instruction of this kind constitutes error is an unresolved issue in this circuit. The text of the bank fraud statute itself is of little help. Section 1344 does not mention "intent," although it requires that a defendant act "knowingly" and speaks of a scheme "to defraud," language which suggests what no one disputes--that some sort of intent is necessary for a bank fraud conviction. Our case law is no more helpful. We have stated in dicta in a bank fraud case that "[t]o act with the 'intent to defraud' means to act wilfully, and with the specific intent to deceive or cheat for the purpose of either causing some financial loss to another, or bringing about some financial gain to oneself." United States v. Brandon, 17 F.3d 409, 425 (1st Cir. 1994) (emphasis added) (quoting United States v. Cloud, 872 F.2d 846, 852 n.6 (9th Cir. 1989)); see United States v. Vavlitis, 9 F.3d 206, 212-13 (1st Cir. 1993) (dicta quoting same language from Cloud). But we have also stated, again in dicta:

In order to convict [the defendant] of bank fraud under 18 U.S.C. § 1344(1), the jury had to find beyond a reasonable doubt that [he] "engaged in or attempted to engage in a pattern or course of conduct designed to deceive a federally chartered or insured financial institution into releasing property, with the intent to victimize the institution by exposing it to actual or potential loss." United States v. Jones, 10 F.3d 901, 908 (1st Cir. 1993) (emphasis added) (quoting United States v. Ragosta, 970 F.2d 1085, 1089 (2d Cir. 1992)). In neither Brandon, Vavlitis, nor Jones, nor in any other fraud case, did we specifically decide whether a scheme to defraud necessarily requires an intent to cause harm. 4

In reviewing case law on this issue, we look to mail and wire fraud cases as well as bank fraud cases because Congress modeled the bank fraud statute on the mail and wire fraud statutes, 18 U.S.C. §§ 1341 & 1343. See United States v. Lilly, 983 F.2d 300, 304 (1st Cir. 1992) (citing S. Rep. 98-225, at 378 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3519). Several other circuits have addressed the issue, and all but one have agreed that intent to cause harm is necessary for a fraud conviction. Most notable is the Second Circuit, which held in a leading case that "[a]lthough the government is not required to prove actual injury, it must, at a minimum, prove that defendants contemplated some actual harm or injury to their victims. Only a showing of intended harm will satisfy the element of fraudulent intent." United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987) (emphasis in original) (citing United States v. Regent Office Supply Co., 421 F.2d 1174, 1181 (2d Cir. 1970)). The Starr court further noted that "Misrepresentations amounting only to a deceit are insufficient to maintain a mail or wire fraud prosecution. Instead, the deceit must be coupled with a contemplated harm to the victim." Id. The trial court in Starr instructed the jury, in terms similar to the instructions challenged in this case, that "[t]o act with intent to defraud means to act knowingly, and with a specific intent to deceive someone, ordinarily for the purpose of causing some financial loss to another or bringing about some financial gain to one's self." Id. at 101. The Second Circuit held that this charge was reversible error: "[w]hile a finding that defendants garnered some benefit from their scheme may be helpful to the jury to establish motive, it cannot be probative of fraudulent intent unless it results, or is contemplated to result, from a corresponding loss or injury to the victim of the fraud." Id.

The Second Circuit has consistently followed the rule set forth in Starr in mail, wire, and bank fraud cases. See, e.g., United States v. Walker, 191 F.3d 326, 334 (2d Cir. 1999) ("Proof of fraudulent intent, or the specific intent to harm or defraud the victims of the scheme, is an essential component of the 'scheme to defraud' element [of mail fraud]."); United States v. Frank, 156 F.3d 332, 337 (2d Cir. 1998) (holding in mail fraud case that "it was error for the district court to instruct the jury that it could find an intent to defraud based solely on the appellants' desire to gain a benefit for themselves"); United States v. Chandler, 98 F.3d 711, 715 (2d Cir. 1996) ("the district court erred in its instructions to the jury on § 1344(1) when it defined 'scheme to defraud' . . . without requiring intent to harm"). In bank fraud cases the court has spoken of the requisite intent to harm as "intent to victimize the institution by exposing it to actual or potential loss." United States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir. 1992); see also United States v. Barrett, 178 F.3d 643, 647-48 (2d Cir. 1999) ("The well established elements of the crime of bank fraud are that the defendant (1) engaged in a course of conduct designed to deceive a federally chartered or insured financial institution into releasing property; and (2) possessed an intent to victimize the institution by exposing it to actual or potential loss.").

At least three courts of appeals have followed the Second Circuit's lead by holding that a fraud conviction requires intent to cause harm. The Eighth Circuit reversed a mail fraud conviction when there was no evidence of such intent, holding that "[t]he essence of a scheme to defraud is an intent to harm the victim." United States v. Jain, 93 F.3d 436, 442 (8th Cir. 1996); see also United States v. Whitehead, 176 F.3d 1030, 1038 (8th Cir. 1999) (applying Jain holding in bank fraud case). Similarly, the Sixth Circuit reversed a mail fraud conviction where the evidence did not "permit[] a reasonable jury to conclude that [the defendant] intended to inflict a tangible injury upon [the alleged victim]." United States v. Frost, 125 F.3d 346, 361 (6th Cir. 1997). The Tenth Circuit also reversed a wire fraud conviction for the same reason. See United States v. Cochran, 109 F.3d 660, 667-69 (10th Cir. 1997).

The defendants rely on McNally v. United States, 483 U.S. 350 (1987), in which the Supreme Court held that a scheme to deprive the citizenry of its "intangible right to good government" was not a violation of the federal mail fraud statute. See id. at 358-61. This holding rejected criminal liability for so-called "honest services" fraud, which had previously been approved by every court of appeals that had addressed the issue. 5 See id. at 358. Although in this case the government did not allege a scheme to deprive WCB of Ober's honest services and the district court did not instruct the jury on such a theory, Kenrick and Ober argue that the rationale of McNally speaks to the issue before us. We agree.The McNally Court's analysis of the history of the mail fraud statute suggests that intent to cause harm to the victim's property rights is a necessary part of criminal fraud. According to the Court, the legislative history "indicates that the original impetus behind the mail fraud statute was to protect the people from schemes to deprive them of their money or property." 483 U.S. at 356 (emphasis added). In addition, longstanding Supreme Court precedent held that "the words 'to defraud' commonly refer 'to wronging one in his property rights by dishonest means or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'" Id. at 358 (quoting Hammerschmidt v. United States, 265 U.S. 182, 188 (1924)); see also Carpenter v. United States, 484 U.S. 19, 27 (1987) (stating that the mail and wire fraud statutes "reach any scheme to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises"). Because a scheme to deprive the public of the honest services of a government official was not directed at "wronging one in his property rights," the Court held that it was not a violation of the mail fraud statute. See McNally, 483 U.S. at 358-61. The focus of McNally's historically-based understanding of fraud on the deprivation of a victim's money or property suggests that dishonestly enriching oneself, without an intent to cause harm to another's property rights, is not fraud within the meaning of the bank fraud statute as it applies in this case.

The government argues, half-heartedly at best, that intent to harm the victim is not required for a fraud conviction. It cites no cases that so hold. We have found only one such case decided by a court of appeals. In United States v. Judd, 889 F.2d 1410 (5th Cir. 1989), the defendants argued, as Kenrick and Ober do here, that under McNally "a conviction for mail and wire fraud can only be sustained if the defendant intended to cause financial loss to the victim." Id. at 1414. The district court in Judd had instructed the jury, in terms similar to the charge in this case, that "intent to defraud could be found if the defendants acted 'knowingly with the specific intent to deceive ordinarily for the purpose of causing some financial loss to another or bringing about some financial gain to oneself.'" Id. (internal quotation marks omitted; emphasis in original). The Fifth Circuit held that this instruction was correct and affirmed the convictions. See id. The court based this conclusion on a narrow reading of McNally:

McNally is read much too broadly when it is claimed to require that mail and wire fraud convictions can be sustained only if motivated by intent to cause financial loss to another. The Supreme Court in McNally held only that the intangible right to good government is not covered by the mail and wire fraud statutes. Id.

We do not agree with the Judd court's apparent conclusion, unsupported by citation to authority, that McNally allows a conviction for fraud when the defendant did not in any sense intend harm to a victim. Furthermore, later cases cast doubt on whether that conclusion is still the law in the Fifth Circuit. See United States v. Schnitzer, 145 F.3d 721, 734 (5th Cir. 1998) (stating that bank fraud conviction requires "intent to victimize [the bank] by exposing it to actual or potential loss"); United States v. Stouffer, 986 F.2d 916, 922 (5th Cir. 1993) (stating that mail and wire fraud convictions "require[] a showing that defendants contemplated or intended some harm to the property rights of their victims").

The reasoning of the Second Circuit and the courts that have followed its lead is persuasive when read in light of McNally. We therefore conclude that a conviction for bank fraud in violation of 18 U.S.C. § 1344 requires proof that the defendant intended to cause harm to the bank. In light of the sometimes inconsistent language in the case law, however, we offer some further explanation of what is meant by "intent" and "harm."

The Supreme Court has spoken generally to the issue of intent in the criminal law:

The element of intent in the criminal law has traditionally been viewed as a bifurcated concept embracing either the specific requirement of purpose or the more general one of knowledge or awareness.

"[I]t is now generally accepted that a person who acts (or omits to act) intends a result of his act (or omission) under two quite different circumstances: (1) when he consciously desires that result, whatever the likelihood of that result happening from his conduct; and (2) when he knows that the result is practically certain to follow from his conduct, whatever his desire may be as to that result."[ 6 ]

Generally this limited distinction between knowledge and purpose has not been considered important since "there is good reason for imposing liability whether the defendant desired or merely knew of the practical certainty of the results." United States v. United States Gypsum Co., 438 U.S. 422, 445 (1978) (internal citations omitted) (quoting W. LaFave & A. Scott, Criminal Law 196, 197 (1972)). The distinction between knowledge and purpose has been thought important only "[i]n certain narrow classes of crimes," such as homicide, treason, and inchoate offenses, where "heightened culpability has been thought to merit special attention." United States v. Bailey, 444 U.S. 394, 405 (1980). For several reasons, bank fraud is not a crime where the distinction between purpose and knowledge is significant.

First, nothing in the language of the bank fraud statute or the legislative history suggests an intent to limit liability to cases where the defendant's purpose was to harm the bank. On the contrary, the statute reaches "[w]hoever knowingly executes, or attempts to execute," a scheme to defraud or obtain money by false pretenses from a bank. 18 U.S.C. § 1344 (emphasis added). 7 Second, people normally commit bank fraud from a desire to enrich themselves, not to harm a bank. Banks are ordinarily defrauded not out of malice or ill will, but because (as notorious bank robber Willie Sutton said), "that's where the money is." Finally, the formulations courts have frequently used in place of "intent to cause harm" suggest that the requisite intent may include knowledge or awareness as well as purpose or desire. 8 See, e.g., Key, 76 F.3d at 353 ("knew or intended" that conduct placed place bank at risk of harm); Stouffer, 986 F.2d at 922 ("contemplated or intended" harm); Starr, 816 F.2d at 98 ("contemplated" harm); see also United States v. Sun-Diamond Growers, 138 F.3d 961, 974 (D.C. Cir. 1998) (holding that in private-sector honest services fraud case, "economic harm" need not "be part of the defendant's intent" but must "be within the defendant's reasonable contemplation"). Accordingly, we hold that the intent to defraud required by the bank fraud statute embraces either a purpose to harm the property rights of a bank or knowledge that such harm is practically certain to result from the defendant's conduct.

The intended result of the bank fraud has been described in various ways, including simply "harm," Whitehead, 176 F.3d at 1038; "actual harm or injury," Starr, 816 F.2d at 98; "tangible injury," Frost, 125 F.3d at 361; "plac[ing the bank] at risk of financial harm," United States v. Key, 76 F.3d 350, 353 (11th Cir. 1996); "victimiz[ing] the institution by exposing it to actual or potential loss," Stavroulakis, 952 F.2d at 694; and "harm to the property rights of the[] victim[]," Stouffer, 986 F.2d at 922. The last formulation most directly satisfies the requirements of McNally and thus would be sufficient to instruct the jury in a bank fraud case. 9 More particular formulations of harm to the property rights of the victim may be appropriate in a given case depending on the nature of the harm alleged.

In a bank fraud case, for example, the particular harm alleged will frequently be "exposing [the bank] to actual or potential loss." Stavroulakis, 952 F.2d at 694 (adopting what has since become the standard Second Circuit formulation). This formulation is consistent with McNally because fraudulently exposing a bank to potential pecuniary loss is "wronging one in his property rights by dishonest methods or schemes." 483 U.S. at 358. Nothing in McNally requires intent to cause an actual loss of money. Focusing on "actual or potential loss" is realistic because many fraudulent schemes are directed at extracting money from banks in the form of loans, which expose the banks to potential pecuniary loss even when no actual pecuniary loss was intended. This formulation comports with Congress's intent to have the bank fraud statute "reach a wide range of fraudulent activity" and thereby "better assure the integrity of the federal banking system." S. Rep. 98-225, at 378 (1983), reprinted in 1984 U.S.C.C.A.N. 3182, 3519; see also Durland v. United States, 161 U.S. 306, 313 (1896) ("evil sought to be remedied" by federal mail fraud statute "is always significant in determining [its] meaning").

There is also a line of authority holding that the intent to deprive a victim of the right to control its assets by denying it material information is a type of harm sufficient to support a fraud conviction. We affirmed the mail fraud convictions of defendants who had lied on liquor license applications because they had deprived the City of Boston of its "right to control the issuance of these licenses." United States v. Bucuvalas, 970 F.2d 937, 945 (1st Cir. 1992). Similarly, the Second Circuit upheld a conviction for defrauding a bank "based upon the theory that Hellman deprived Freehold Savings of information relevant to its decision whether it would extend him a loan; i.e., that he lied in order to deprive Freehold Savings of control over its own assets." United States v. DiNome, 86 F.3d 277, 283 (2d Cir. 1996); see United States v. Rossomando, 144 F.3d 197, 201 n.5 (2d Cir. 1998) ("[DiNome] is an example of a case in which the concrete harm contemplated by the defendant is to deny the victim the right to control its assets by depriving it of information necessary to make discretionary economic decisions."). Other circuits have affirmed convictions on the same grounds. See United States v. Catalfo, 64 F.3d 1070, 1077 (7th Cir. 1995) ("By means of deception, [defendant] deprived GH of the right to control its risk of loss, which had a real and substantial value."); United States v. Shyres, 898 F.2d 647, 652 (8th Cir. 1990) ("[D]eprivation of the right to control spending can serve as the basis for a mail fraud conviction.").

Courts have repeatedly explained that the right to control theory is consistent with McNally's requirement that the scheme be directed at "wronging one in his property rights." 483 U.S. at 358. Soon after McNally, the Supreme Court held that a right's "intangible nature does not make it any less 'property' protected by the mail and wire fraud statutes." Carpenter v. United States, 484 U.S. 19, 25 (1987). As we explained in Bucuvalas, "In its broadest sense, a 'property' interest resides in the holder of any of the elements comprising the 'bundle of rights' essential to the use or disposition of tangible property or to the exercise or alienation of an intangible right." 970 F.2d at 945. Although the right to control is "only one of the several rights in the bundle," United States v. DeFries, 43 F.3d 707, 710 (D.C. Cir. 1995), it has "real and substantial value," Catalfo, 64 F.3d at 1077, because "the value of credit or insurance transactions inherently depends on the ability of banks and insurance companies to make refined, discretionary judgments on the basis of full information," Rossomando, 144 F.3d at 201 n.5. See also United States v. Wallach, 935 F.2d 445, 462-63 (2d Cir. 1991) ("Examination of the case law exploring the 'right to control' reveals that application of the theory is predicated on a showing that some person or entity has been deprived of potentially valuable economic information."). In McNally itself, where the Court reversed convictions because of erroneous jury instructions, it noted that the jury was not "charged that to convict it must find that the Commonwealth was deprived of control over how its money was spent." 483 U.S. at 360. This observation suggests that if the jury instructions in McNally had focused on, and the evidence proved, a deprivation of the "right to control" instead of the "right to good government," the Court would have upheld the convictions. 10

We wish to be clear, however, that this "right to control" theory of bank fraud does not mean that any falsehood told to a bank, or any breach of fiduciary duty by a bank official with an undisclosed conflict of interest, constitutes a deprivation of the bank's right to control its assets. The falsehood or nondisclosure must meet the standard of materiality set forth by the Supreme Court in Neder:

[A] matter is material if:

"(a) a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question; or

"(b) the maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action, although a reasonable man would not so regard it." 119 S. Ct. at 1840 n.5 (quoting Restatement (Second) of Torts § 538 (1976)); see also id. at 1837 (stating in discussion of tax fraud statute that "[i]n general, a false statement is material if it has a natural tendency to influence, or [is] capable of influencing, the decision of the decisionmaking body to which it was addressed") (internal quotation marks omitted). In light of this materiality standard, we cannot agree with the suggestion in some cases that a deprivation of the right to control occurs only when the information concealed or misrepresented has a value beyond its potential to affect an economic decision. See, e.g., United States v. Mittelstaedt, 31 F.3d 1208, 1217 (2d Cir. 1994) ("To be material, the information withheld either must be of some independent value or must bear on the ultimate value of the transaction."). Although information of the kind described in Mittelstaedt increases the likelihood of a materiality finding by the fact-finder, it does not constitute the essence of materiality. Such a requirement would be inconsistent with the broad common-law definition of materiality adopted by the Supreme Court in Neder.

We acknowledge that there may be some overlap in bank fraud cases between harm described as "actual or potential pecuniary loss" and harm described as denying the bank the right to control its assets by depriving it of information necessary to make discretionary economic decisions. This is so because the economic decisions made by banks can result in actual pecuniary loss or exposure to potential pecuniary loss. The right to control theory of harm focuses on the intangible process of economic decision-making by the institution. The "actual or potential pecuniary loss" theory of harm focuses on the more tangible consequences of that decision-making. Both types of harm may be present in a given case. Therefore, depending on the facts of the case and the nature of the government's allegations, the court could choose to give an instruction that satisfies McNally by referring generally to an intent to harm the property rights of the bank, or it could elaborate by identifying a particular harm, including but not limited to exposing the bank to actual or potential pecuniary loss or depriving it of its right to control the disposition of its property. See United States v. Rosario-Peralta, 199 F.3d 552, 567 (1st Cir. 1999) (holding that district court has discretion whether to give case-specific instruction incorporating particular evidence).

Measured against the standards we have set forth here, the district court's instructions in this case were erroneous because they allowed the jury to convict Kenrick and Ober of bank fraud without finding that they intended to harm WCB. The court's instruction that intent to defraud could be established by a "purpose of either causing some financial gain to another or one's self" misstated the law. Although a purpose of enriching oneself may (and usually does) accompany an intent to harm a bank, the latter is what counts in deciding whether a defendant is guilty of bank fraud.

Having found error, we must determine whether the error was plain, i.e., obvious or clear under current law. See Olano, 507 U.S. at 734. We conclude that it was not. Before today's decision, we had never held that a bank fraud conviction requires intent to harm. Although we believe that this reading of the bank fraud statute is the one most consistent with the Supreme Court's decision in McNally, that decision did not explicitly decide the issue we resolve here. Moreover, the district court had reason to believe its charge was correct. The erroneous language in its instruction appears to be derived from First Circuit Pattern Criminal Jury Instruction 4.14. 11 The pattern instruction in turn is based largely on dicta, quoted above, in our decision in Brandon, 17 F.3d at 425. See also E. Devitt, C. Blackmar, et al., Federal Jury Practice & Instructions § 40.14 (1992) (instruction including similar definition that "intent to defraud is accompanied, ordinarily, by a desire or a purpose to bring about some gain or benefit to oneself or some other person or by a desire or a purpose to cause some loss to some person"). 12

In these circumstances we cannot say that the error was obvious or clear under current law. This is not a case like United States v. Paniagua-Ramos, 135 F.3d 193 (1st Cir. 1998), where we found an erroneous Allen charge to be clear error under current law. See id. at 199. Although the instructions given in that case were based in part on a proposed First Circuit Pattern Instruction, they omitted one of the three necessary elements of an Allen charge, which was contained in the pattern instruction and required by twenty-five years of circuit precedent. See id. at 195-96, 199. Here, in contrast, the court repeated an error (as we have now found it to be) contained in the pattern instruction. Because the error was not plain, we lack the authority to correct it pursuant to the standards applicable to plain error review. See Olano, 507 U.S. at 734 (requirement that error be "plain" is "limitation on appellate authority under Rule 52(b)").


Although the limited scope of plain error review precludes us from evaluating further the defendants' bank fraud convictions on the basis of the error in the jury instructions, that limitation does not mean that their meritorious legal argument is for naught. Recognizing that "the Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged," In re Winship, 397 U.S. 358, 365 (1970), both defendants challenge the sufficiency of the evidence underlying their convictions. In reviewing this challenge, our conclusions above concerning what "constitute[s] the crime" of bank fraud dictate the proof requirements in this case. In evaluating that proof, we ask "'whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.'" United States v. Blasini-Lluberas, 169 F.3d 57, 62 (1st Cir. 1999) (quoting Jackson v. Virginia, 443 U.S. 307, 319 (1979)).

A. Count 5 (Bank Fraud)

Ober was convicted of bank fraud on Count 5 for his involvement in the 222 Stackpole Street transaction. Kenrick was acquitted on the same count. To convict a defendant of bank fraud, the government must prove that he "(1) engaged in a scheme or artifice to defraud, or made false statements or misrepresentations to obtain money from; (2) a federally insured financial institution; and (3) did so knowingly." United States v. Brandon, 17 F.3d 409, 424 (1st Cir. 1994). The defendant must have acted with intent to defraud the bank, see id. at 425, which, as we have held today, requires that he had a purpose to harm the property rights of the bank or knowledge that such harm was practically certain to result from his conduct. Finally, "materiality of falsehood is an element of the federal mail fraud, wire fraud, and bank fraud statutes." Neder v. United States, 119 S. Ct. 1827, 1841 (1999).

Viewing the record in the light most favorable to the government, there was ample evidence to convict Ober of bank fraud in connection with the 222 Stackpole Street transaction. 13 Based on the evidence recounted above, the jury could have found that Ober was Flynn's partner in purchasing 222 Stackpole Street; 14 that he concealed his interest by, inter alia, causing Flynn to submit a loan application to WCB that falsely listed her as sole owner; that WCB made a $900,000 loan to finance the purchase without approval of the Board of Directors; and that someone falsified the Board minutes to make it appear that the Board had approved the loan. Considering Ober's interest in the transaction and his position as WCB president, the jury could infer that he caused the loan to be made and either altered the Board minutes himself or caused them to be altered.

Ober's intent to harm WCB in its property rights could certainly be inferred from his act of taking a secret $900,000 loan. The fact that the loan was repaid quickly and actually netted WCB a profit does not mean that the bank was not placed at risk and does not preclude a finding that Ober intended to expose the bank to potential pecuniary loss at the time the loan was obtained. Also, the evidence showed that Ober deprived WCB of its right to control the disposition of its property, not only by concealing the material information necessary to make an informed lending decision, but also by preventing it from making any lending decision at all by taking the loan without Board approval (and then falsifying bank records to conceal this fact). Furthermore, although not necessary for conviction, as we discuss below in connection with Count 4, the jury could have found--based on the size of the loan, the location of the property outside WCB's usual lending area, the speculative nature of the condominium conversion, Flynn's lack of history of business with WCB, and the fact that Ober's interest in the loan violated Massachusetts banking law--that WCB would not have made the loan if all the material facts had been revealed. A rational jury could have found Ober guilty beyond a reasonable doubt on Count 5. 15

B. Count 4 (Bank Fraud)

Ober and Kenrick were both found guilty of bank fraud in connection with the 8-10 Emerson Street transaction. The government's allegation as to this transaction was essentially that it was a separate execution of the same scheme to defraud WCB charged in Count 5. 16 The government alleged that Kenrick and Ober entered into a secret agreement whereby Kenrick would sell 222 Stackpole Street to Ober and Flynn, giving Ober the opportunity to make a large profit by converting the property to condominiums and Kenrick the chance to avoid the impending increase in the capital gains tax; in exchange, Ober would make financing available through WCB to Chung Lee and her parents to buy 8-10 Emerson Street, allowing Kenrick the same large tax advantage on that sale.

The evidence, especially Chung Lee's testimony, 17 was sufficient to allow the jury to find that there was such a secret agreement. 18 Like the Stackpole Street mortgage, then, the Emerson Street mortgage was part of a scheme in which Ober deceptively used WCB's funds, and placed WCB at risk of loss, for his personal benefit. There were differences between the two executions of the scheme, of course. The benefit to Ober from Emerson Street was only indirect; he made no money from that transaction in isolation. The jury could have found, however, that he indirectly benefitted because the Emerson Street loan made possible the Stackpole Street purchase from which Ober garnered a substantial profit. The Emerson Street mortgage was approved by the WCB Board of Directors, but Ober never disclosed to them the existence of the secret quid-pro-quo agreement. Both loans benefitted Ober while exposing WCB to potential loss. No actual pecuniary loss resulted directly from the Stackpole Street loan, but the bank lost $119,645.84 when the Lees defaulted on the Emerson Street loan.

On appeal, Kenrick and Ober attempt to shift the focus from their nondisclosure of the secret agreement onto the financial status of the Lees. They argue that the Lees were creditworthy borrowers who would have been granted a loan in any event, and that this fact precludes conviction on Count 4 because bank fraud requires an intent to expose the bank to an unusual or heightened risk of loss. At least two circuits have held, however, that the creditworthiness of the borrower is no defense to bank fraud when there is concealment of an insider interest in the transaction. See United States v. Doke, 171 F.3d 240, 245-46 (5th Cir. 1999); United States v. Holley, 23 F.3d 902, 909 (5th Cir. 1994); United States v. Walker, 871 F.2d 1298, 1307 (6th Cir. 1989). Moreover, the defendants' argument misses the point in two important ways.

First, they mistake the character of the falsehood required for conviction by arguing, in effect, that it must have induced the bank to make a loan that would not otherwise have been made. On the contrary, to be criminally fraudulent a defendant's deceptive course of conduct must be material, see Neder, 119 S. Ct. at 1841, and it must be directed at depriving the victim of a property right, but there is no requirement that it actually cause the victim to change its behavior, see id. ("The common-law requirements of 'justifiable reliance' and 'damages,' . . . plainly have no place in the federal fraud statutes."). Materiality will thus frequently be an important issue. A falsehood can be material within the definition adopted by the Supreme Court, see id. at 1840 n.5, even if it did not in fact induce the victim to alter its conduct, although if such alteration did occur it is obviously probative of materiality. A misrepresentation about a borrower's creditworthiness can certainly be a material falsehood that supports a bank fraud conviction, but a different falsehood is also sufficient if it is material.

By suggesting that a conviction requires an intent to expose the bank to a heightened or unusual risk of loss, the defendants also mistake the nature of the requisite intended harm to the bank's property rights. Although banks are in the business of exposing themselves to loss by making loans, they are entitled to decide when to do so with all of the cards on the table. When a loan is procured without all of the cards (i.e., material facts) on the table, the bank has been deprived of its entitlement to make that decision--in other words, its right to control its assets, as we have discussed above--and has suffered a real harm to its property rights regardless of the financial status of the borrower. As Judge Learned Hand stated in an oft-cited mail fraud case:

A man is none the less cheated out of his property, when he is induced to part with it by fraud, because he gets a quid pro quo of equal value. It may be impossible to measure his loss by the gross scales available to a court, but he has suffered a wrong; he has lost his chance to bargain with the facts before him. That is the evil against which the statute is directed. United States v. Rowe, 56 F.2d 747, 749 (2d Cir. 1932).

There was evidence that Kenrick and Ober had a secret quid-pro-quo agreement that gave Ober an indirect financial interest in the Emerson Street loan, and that Kenrick applied for the loan on the Lees' behalf and Ober approved it and presented it to the Board of Directors for ratification while concealing the material fact of that agreement. Notwithstanding the district court's comment during its jury instructions that there had been no evidence offered of intent to cause a loss, there was evidence that Kenrick and Ober intended to harm the property rights of WCB. The harm could be viewed as tangible, a fraudulently induced exposure to potential pecuniary loss. Alternatively, it could be seen as intangible, a deprivation of the bank's right to control its assets by denying it the material information it needed to make an informed decision on the Emerson Street loan. On either view there was sufficient evidence that Kenrick and Ober intended to defraud WCB. A rational jury could have found them both guilty beyond a reasonable doubt on Count 4. 19

C. Counts 18 and 20 (Bank Fraud)

Ober was found guilty of two counts of bank fraud in connection with loans to the DGB Realty Trust, which Ober owned with Glenn Gates and William Upton. Count 18 concerned WCB's $15,000 demand loan to DGB, which was increased to $25,000 in December 1987, was never disclosed to or ratified by the Board of Directors, and was succeeded by a loan in the name of Upton that had not been paid off at the time of trial. Count 20 concerned Ober's practice of having DGB checks paid, even though there were insufficient funds in the DGB checking account, and held for long periods until there was enough money in the account to cover them--thus essentially providing Ober and his partners with undisclosed interest-free loans. The indictment alleged, and the evidence showed, that one check in the amount of $6,780.42 was thus held for over nine months.

The evidence was sufficient to find Ober guilty on both counts. The fraud consisted not merely in Ober's failing to disclose to the Board something that he had a fiduciary duty to disclose, but in the nature of that "something"--the plainly material fact that he was putting bank assets in his own pocket by means of undisclosed loans that put the bank at significant risk of loss and that were eventually repaid either incompletely or without interest. In short, the evidence on these counts, like the evidence on Counts 4 and 5, suggested that Ober treated WCB as his personal piggy bank, the assets of which he felt free to dispose of by loans to himself, his associates, or their designees. On that basis a rational jury could have found Ober guilty of bank fraud as we have defined it above.

D. Count 22 (Perjury)

Ober was convicted of perjury for denying, under oath, that he was familiar with the D & E Realty Trust and that he had ever participated in making a loan in which he had an undisclosed interest. As recounted above, there was evidence that Ober was present when the D & E Realty Trust was executed, owned a half interest in it, and received half its net income. There was also evidence that he participated in making undisclosed loans to the Riverview Development Trust and the DGB Realty Trust while having an interest in each trust. On the basis of that evidence, the jury could have concluded that both of Ober's statements--which he stipulated were material--were false and that he made them willfully. See United States v. Cardales, 168 F.3d 548, 558 (1st Cir.), cert. denied, 120 S. Ct. 101 (1999) (elements of perjury are "falsity, materiality, and willfulness"). Although Ober now argues that the question whether he was "familiar with" the D & E Realty Trust was ambiguous, there was sufficient evidence to prove that his denial was false on any reasonable interpretation of the question.


Ober raises two additional arguments, neither of which merits extended discussion. He contends first that he was denied due process as a result of the government's alleged delay in seeking an indictment on the bank fraud charges for approximately three years after its investigation was completed. To succeed on such a claim, a defendant must demonstrate "that the preindictment delay caused him actual, substantial prejudice [and] that the prosecution orchestrated the delay to gain a tactical advantage over him." United States v. Stokes, 124 F.3d 39, 47 (1st Cir. 1997) (citing United States v. Marion, 404 U.S. 307, 324 (1971)). Ober can show neither; instead, he offers only "mere speculation and bare allegations," which are clearly insufficient to make out a due process violation. United States v. McCoy, 977 F.2d 706, 711 (1st Cir. 1992).

Ober also argues that the district court violated his due process rights by preventing him from recross-examining an expert witness, appraiser Calvin Hastings, called by Kenrick to testify to the value of 222 Stackpole Street. The court barred Kenrick from conducting a redirect examination of Hastings as a sanction for Kenrick's failure--which was not discovered until the government's cross-examination--to disclose Hastings's report to the government. The court permitted Ober's attorney, who had already cross-examined Hastings, to begin recross, with instructions that it be limited to the scope of the government's cross-examination. When Ober's attorney began by asking Hastings whether he had expected he would be cross-examined on the report, the court interrupted him, stopped the examination, and excused the witness. Ober neither objected nor made an offer of proof.

The district court has "extensive discretion" in controlling recross-examination. United States v. Sorrentino, 726 F.2d 876, 885 (1st Cir. 1984). Here the court stopped the recross because it concluded that Ober's attorney did not intend to re-examine Hastings on matters within the scope of the government's cross, but instead to conduct, in effect, the redirect that Kenrick's counsel could not. This is exactly the sort of judgment call that we should not second-guess. Considering that Ober had already had an opportunity to cross-examine Hastings, the court's limitation of his recross-examination was not an abuse of its extensive discretion, let alone a due process violation.


1. The jury was also told that the Federal Reserve Board's Regulation O required a bank officer to disclose his interest in a loan to the bank's board of directors and to abstain from voting on the loan. See 12 C.F.R. pt. 215.

2. This contention is raised more clearly by Kenrick than by Ober. Ober's argument, although difficult to parse and citing a different portion of the instructions, appears in the main to echo Kenrick's; we will assume that both defendants have raised the same issue. To the extent that Ober also makes a separate argument that the court erred by not requiring proof that the bank in fact lost money as a result of his conduct, he is clearly incorrect: section 1344 by its terms punishes not merely successful frauds, but any execution or attempted execution of a scheme to defraud a federally insured bank. See United States v. Blasini-Lluberas, 169 F.3d 57, 65 (1st Cir. 1999) ("The government need not prove actual loss as a result of the scheme . . . [n]or must the government show that the defendant personally benefitted from the scheme.").

3. Since the trial in this case, the Supreme Court has held that "materiality of falsehood" is also an element of bank fraud under either subsection of § 1344. Neder v. United States, 119 S. Ct. 1827, 1841 (1999). The district court instructed the jury in terms consistent with our pre-Neder precedent, which held that materiality is an element of a scheme to obtain money by false or fraudulent pretenses but not of a scheme to defraud. See United States v. Smith, 46 F.3d 1223, 1236 & n.7 (1st Cir. 1995). Neither defendant challenges this instruction on appeal. Although after Neder there may still be some distinctions between the forms of bank fraud defined in § 1344(a)(1) (now § 1344(1)) and § 1344(a)(2) (now § 1344(2)), see, e.g., United States v. Fontana, 948 F.2d 796, 801-02 (1st Cir. 1991) (suggesting that check kiting can be prosecuted only under § 1344(1) because § 1344(2) requires affirmative misrepresentation), we need not explore them here. Neither the indictment nor the jury instructions specified under which subsection Kenrick and Ober were charged. The district court instructed the jury that a conviction under either subsection requires intent to defraud, and the parties do not suggest that this instruction was incorrect.

4. Although in Jones we quoted language from another circuit suggesting that intent to harm is necessary for a bank fraud conviction, and in Brandon and Vavlitis we quoted language from a different circuit suggesting the opposite, in none of those cases were we required to decide the issue before us today, because none of the defendants there raised the argument that Kenrick and Ober raise here. Our resolution of this issue necessarily rejects the quoted dicta from at least one of these prior cases, but it does not overrule any previous holding of this court.

5. In 1988 Congress restored the status quo ante by enacting 18 U.S.C. § 1346, which defines "'scheme or artifice to defraud' [to] include[] a scheme or artifice to deprive another of the intangible right of honest services." Section 1346 is inapplicable here because the allegedly fraudulent acts in this case took place before its effective date.

6. These definitions are derived from Section 2.02 of the ALI Model Penal Code, which states in relevant part: (2) Kinds of Culpability Defined. (a) Purposely. A person acts purposely with respect to a material element of an offense when: (i) if the element involves the nature of his conduct or a result thereof, it is his conscious object to engage in conduct of that nature or to cause such a result . . . (b) Knowingly. A person acts knowingly with respect to a material element of an offense when: . . . (ii) if the element involves a result of his conduct, he is aware that it is practically certainthat his conduct will cause such a result.

7. The statute's "knowingly" requirement, of course, applies not only to the harm resulting from the defendant's conduct, but also to the deceitful character of that conduct. See, e.g., Brandon, 17 F.3d at 425 (bank fraud conviction requires "intent to deceive or cheat").

8. We attach little significance to the occasional use in fraud cases of the term "specific intent to defraud." See, e.g., Carpenter, 484 U.S. at 28; United States v. Reeder, 170 F.3d 93, 102 (1st Cir. 1999). Although the term "specific intent" sometimes "corresponds loosely" with "purpose," Bailey, 444 U.S. at 405, its meaning is often confused and differs substantially in different contexts, see id. at 403; 1 W. LaFave & A. Scott, Substantive Criminal Law § 3.5(e) (1986).

9. Of course, in cases where 18 U.S.C. § 1346 applies, depriving a victim of honest services will also satisfy the intended harm requirement. See United States v. Sawyer, 85 F.3d 713, 725 (1st Cir. 1996).

10. We note that none of the "right to control" cases we have cited involved bank fraud convictions. In DiNome, 66 F.3d 277, however, the victim of the fraud was a bank, and the case's rationale is fully applicable to bank fraud. The defendant there was convicted of wire and mail fraud, not bank fraud, only because his fraudulent acts occurred before the bank fraud statute (18 U.S.C. § 1344) took effect in 1984. Moreover, the "right to control" cases are persuasive here regardless of the identity of the victims. We have found no authority suggesting that, apart from being confined to cases where the victim is a financial institution, the bank fraud statute protects a narrower range of property rights than the mail and wire fraud statutes. Fraudulent schemes directed at depriving a bank of the right to control its assets may be covered by several other federal criminal statutes. See United States v. Colon-Munoz, 192 F.3d 210, 219-26 (1st Cir. 1999) (discussing convictions, on related facts, for bank fraud, misapplication of bank funds, 18 U.S.C. § 657, false entry in bank books, id. § 1006, fraudulently benefitting from a loan, id., and false statement to a bank, id. § 1014). That fact may explain in part why bank fraud prosecutions have not explicitly relied on the "right to control" theory of harm to the property rights of the bank. Institutional victims other than banks are not protected by such specifically tailored statutes. Furthermore, 18 U.S.C. § 1346, allowing prosecution for "honest services" fraud, took effect in November 1988, slightly more than four years after § 1344; thus, for the majority of the time the bank fraud statute has been in effect, the government has had the option in many cases of prosecuting defendants under a theory that does not require proof of intent to harm the victim's property rights, making it unnecessary to rely on a "right to control" theory even when it would be supported by the evidence.

11. First Circuit Pattern Criminal Jury Instruction 4.14 (Bank Fraud) provides in pertinent part: A scheme to defraud is ordinarily accompanied by a desire or purpose to bring about some gain or benefit to oneself or some other person or by a desire or purpose to cause some loss to some person. . . . To act with "intent to defraud" means to act willfully and with the specific intent to deceive or cheat for the purpose of either causing some financial loss to another or bringing about some financial gain to oneself. The pattern instructions as a whole were approved for publication by the assembled federal judges at the First Circuit Judicial Conference on October 1, 1997 (while the trial in this case was in progress), but as Judge Hornby emphasized in his Preface to the published instructions, "the Court of Appeals has not in any way approved the use of a particular instruction."

12. In this case the district court deviated from the pattern instruction in three significant ways: by adding a comment that "Here, there is not alleged--effectively there hasn't been evidence offered--that there was an intent to cause a loss to some person"; by inserting an extra "or" in the definition of intent to defraud, thus making it disjunctive ("deceive or cheat or for the purpose . . . ."); and by substituting "causing some financial gain to another or one's self" for "causing some financial loss to another or bringing about some financial gain to oneself," also in the definition of intent to defraud. Although these deviations may have made the erroneous statement of law contained in the pattern instruction more explicit, they could not have made the legal error itself any more obvious.

13. In the midst of his argument that the evidence on Count 5 was insufficient, Ober contends that the district court erred in admitting allegedly unreliable WCB documents. To the limited extent that his evidentiary arguments are developed enough to permit review, it is clear from our review of the record that the district court did not abuse its discretion in admitting the challenged evidence. See United States v. Mitchell, 85 F.3d 800, 812 n.11 (1st Cir. 1996).

14. Ober argues that if he had an interest in the Stackpole Street property it was unenforceable under the statute of frauds. Even if he is correct, his significant financial interest in the transaction was still a material fact that he had a duty to disclose; its unenforceability does not preclude his conviction. See United States v. Henderson, 19 F.3d 917, 922-23 (5th Cir. 1994).

15. We note that Ober's fraud was hardly novel. We have upheld the bank fraud convictions of bank insiders for making loans in which they had undisclosed interests. See United States v. Mangone, 105 F.3d 29, 31 (1st Cir. 1997) (credit union president); United States v. Smith, 46 F.3d 1223, 1226 (1st Cir. 1995) (credit union founder and general counsel). Other circuits have done the same. See, e.g., United States v. Hanson, 161 F.3d 896, 898 (5th Cir. 1998) (bank branch president); United States v. Harvard, 103 F.3d 412, 421 (5th Cir. 1997) (bank director); United States v. Henderson, 19 F.3d 917, 922-23 (5th Cir. 1994) (bank owner/board chairman); United States v. Rackley, 986 F.2d 1357, 1361 (10th Cir. 1993) (bank president); United States v. Walker, 871 F.2d 1298, 1307 (6th Cir. 1989) (bank president).

16. "Under the bank fraud statute, 18 U.S.C. § 1344, each execution of a scheme to defraud constitutes a separate indictable offense." United States v. Brandon, 17 F.3d 409, 422 (1st Cir. 1994).

17. Kenrick argues on appeal that the jury could not rationally find the alleged agreement between him and Ober because Chung Lee's testimony was not credible. This argument is unavailing because "[c]redibility assessments are properly left to the jury." United States v. Woodward, 149 F.3d 46, 60 (1st Cir. 1998).

18. A finding that this quid-pro-quo agreement existed is necessary to sustain the convictions on Count 4 because, the government's arguments to the contrary on appeal notwithstanding, its existence is the one material fact that the defendants allegedly concealed from WCB with respect to the Emerson Street transaction. The jury's verdict on Count 4 may therefore be logically inconsistent with its verdict on Counts 1, 2, and 3, finding both defendants not guilty of conspiracy and bank bribery. Inconsistency of this sort, however, does not affect our analysis of the sufficiency of the evidence on the counts for which the defendants were convicted. See United States v. Powell, 469 U.S. 57, 67-69 (1984).

19. The jury might have thought that Kenrick stood in a somewhat different position from Ober. Because he owed no fiduciary duty to WCB and had no power to cause it to make the loan, it could perhaps be argued that he did not himself execute the scheme to defraud. The bank fraud charge against Kenrick, however, was alternatively premised on an aiding and abetting theory. See 18 U.S.C. § 2. Even if Kenrick did not execute the scheme, there was sufficient evidence that he "associated himself with the venture, participated in it as something he wished to bring about, and sought by his actions to make it succeed," United States v. Colon-Munoz, 192 F.3d 210, 223 (1st Cir. 1999), to find him guilty of aiding and abetting Ober's fraud.

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