Arrested for Bank Fraud in Texas

When you are arrested for bank fraud in Texas, the charges usually come along with other serious felony charges like money laundering and mail fraud.   Identity theft and RICO charges may accompany a bank fraud charge, too.

Over the past few years, more and more prosecutions in both state and federal court involve some kind of bank fraud allegations.  The risk of being investigated and charged with violation of some kind of financial fraud crime is high right now.

So what is bank fraud?  And who is getting arrested for bank fraud, and what are they doing that is getting them busted?

 

What is Bank Fraud?

Both federal criminal statutes and the Texas Penal Code outlaw bank fraud.  And both state and federal law cast wide nets over what may be considered bank fraud and what institutions are included as potential victims.

1.      Definition of Bank Fraud

In sum, “bank fraud” is going to involve a plan to get money, assets, or property from a financial institution or its depositors by some kind of material misrepresentation (fraudulent act).  It’s sneaky and without violence, which is a characteristic that sets it apart from charges of bank robbery or grand theft.

2.      Defining the Victim

Lots of businesses can be considered banks under the bank fraud laws.  From those strip center check cashing storefronts to the national bank in a skyscraper down in central Dallas, all sorts of operations count as “financial institutions” subject to bank fraud.

Texas Law

Under Chapter 32 of the Texas Penal Code, “financial institution” is defined as:

a bank, trust company, insurance company, credit union, building and loan association, savings and loan association, investment trust, investment company, or any other organization held out to the public as a place for deposit of funds or medium of savings or collective investment.”  Texas Penal Code Section 32.01(1)

Federal Law

In federal cases, a “financial institution” is identified by its status as a federal creation or by the kind of federal insurance applicable to it.  They are Federal Reserve banks, member banks, national banks, and all banks whose deposits are insured by the Federal Deposit Insurance Corporation (18 U.S.C. §  656) as are those whose deposits are insured by the Federal Savings and Loan Insurance Corporation (now the Office of Thrift Supervision) or the National Credit Union Administration(18 U.S.C. §  657).   See, e.g., The United States Attorney General – Criminal Resource Manual at 801.

3.      Felony Conviction

Under both Texas law and federal statutes, bank fraud is considered to be a felony charge.  Depending upon the charges involved in the individual case, the accused faces both significant jail time as well as fines and orders of restitution to fraud victims.

Variety of Acts Considered Bank Fraud

All sorts of operations and schemes can get you arrested for bank fraud here in Texas.  Some you may recognize, others may be new to you.  The list includes:

1. Embezzlement

Embezzlement is a type of bank fraud.  It involves an employee or worker of the financial institution with access or possession of its money, funds, or credit unlawfully taking the money, funds, or credit for his own personal use.  This has been happening in banks for a very long time.  See, United States v. Northway, 120 U.S. 327 (1887).

2. Abstraction

Close to embezzlement is the crime of abstraction.  Here, the crime involves the worker or employee wrongfully taking or withdrawing monies, funds or credits without the knowledge or consent of the financial institution.  The intent here is to use the stuff for oneself or some other person or entity other than the bank. See United States v. Archambault, 441 F.2d 281 (10th Cir. 1971), cert. denied, 404 U.S. 843 (1971).

3. Willful Misapplication of Funds

Here, there is a willful misuse of bank funds, credit, or money by their distribution under a false record that is intended to deceive.  See, United States v. Kennedy, 564 F.2d 1329, 1339 (9th Cir. 1977), cert. denied, 435 U.S. 944 (1978).

4. Loans to Un-creditworthy Borrowers

It is considered bank fraud for a bank employee to approve a loan to someone who is a bad risk and not credit-worthy.  Bank loan officers do not violate the law by making a bad call on approving a loan which later defaults.  That’s just bad business judgment.

Here, it becomes bank fraud if the bank officer knows that the collateral has little if any value, or that the borrower does not have the means to repay the loan, and she approves the loan anyway.  They usually have a financial incentive in doing so.

5. Check Kiting

Banks have worked hard to eliminate “float” which lessens the availability of a successful check kite scheme.  Check kiting still happens, though.  Here, an employee of the bank can be involved and approve the payment of a check even though there are insufficient funds to cover the check in the account.  In the standard check kiting scheme, checks are deposited into one bank account where some (if not all) of the deposited amount is made available for use by the account holder.  These checks are drawn on a second bank, but there is little if any funds in that account.  By the time that the first bank discovers insufficient funds to cover the deposits, the withdrawals have been made on the kited checks.

Defenses to Bank Fraud Charges

While most bank fraud cases are heavy with documentation to support their charges, there are still defenses that can be asserted in a bank fraud case. For instance, the defendant may challenge the ability of the prosecution to show any intent to defraud.

No Intent

Fraud is an intentional act. To prove bank fraud, the accused must be proven to have acted with intent or consciously knowing that he or she was misrepresenting material facts in order to deceive someone.

If you deposit a check thinking it’s good and it bounces, then you had no intent.  This is a defense to a charge of bank fraud.

Failure of Prosecution to Meet Burden

The prosecution must meet its burden of proof in bank fraud cases beyond a reasonable doubt.  Each element must be proven to this degree or standard.  Another defense is to find failures in the evidence or proof of the prosecution’s case.  Does the paperwork hold up to the rules of evidence?  Is there hearsay?

Examples of Recent Texas Bank Fraud Charges

In the past few weeks, there have been numerous news stories about people being arrested for bank fraud here in Texas.  These bank fraud arrests have been for a number of different kinds of alleged schemes or operations, demonstrating the variety of acts that law enforcement considers to be “bank fraud” here.  For example:

1. McKinney Check-Cashing Convenience Store for Cashing Stolen Checks

Over in McKinney, the owner of a news stand has just pled guilty to money laundering in a plea deal where the bank fraud charges were dropped along with identity theft and some other felonies.

Seems the federal prosecutors alleged the newsstand had been illegally cashing checks at the Gateway Newsstand, a convenience store with check-cashing services.  According to the complaint, the owner cashed over 3400 U.S. Treasury checks that were addressed to people outside of Texas which were either stolen or paid by the government on false income tax returns.

2. Bank Teller at First National Bank for Embezzlement

Federal prosecutors had charged a woman employed for over ten years as a bank teller at First National Bank with bank fraud. They allege she took over $1.25 Million over the 10 year time period via bank fraud.

3. UTEP Basketball Star, Her Fiance and Friends Indicted for Bad Loan Applications

Federal prosecutors arrested Jenzel Nash, a star forward on the University of Texas at El Paso basketball team, along with her fiancé and five friends, with bank fraud.  Allegations are that they applied for a loan with GECU and falsified Nash’s monthly salary as well as her fiance’s salary in order to get the loan approved.

 

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For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth article,” Pre-Arrest Criminal Investigations” and prior discussions in: 

 


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