United States District Court, E.D. Kentucky, Southern Division, Pikeville
OPINION AND ORDER
K. CALDWELL, UNITED STATES DISTRICT COURT CHIEF JUDGE
matter is before the Court on several motions to dismiss
charges (DE 38, 39, 40) in the indictment filed by the
Brent M. Lee was a loan officer at Bank Branch and Trust
Company (BB&T). According to the indictment, BB&T
prohibited Lee from making any further loans to defendant
Paul D. Fannin. Thus, Lee and Fannin devised a scheme by
which Fannin's daughter, defendant Chelsea Stone, would
apply for a $100, 000 loan in her name and give the proceeds
to Fannin for his own use. Later, the government alleges, the
defendants modified the loan so that Stone would receive an
additional almost $150, 000 in bank funds that she ultimately
gave to Fannin for his personal use. With regard to each of
these transactions, the government alleges that Stone pledged
security for the loans that she and Lee knew she did not own.
the defendants are charged with conspiring to commit bank
fraud. Defendants Lee and Fannin are also charged with two
counts of committing bank fraud. Lee is charged with two
counts of misapplying bank funds while employed by the bank
and four counts of issuing the loan with intent to defraud
BB&T. Fannin is charged with one count of money
laundering related to the proceeds of the loan. Stone is
charged with three counts of making a false statement on a
Motions to dismiss
Fannin's motion to dismiss on the basis that he relied on
Lee's advice and authorization of the allegedly
fraudulent transactions (DE 36)
has filed a motion to dismiss in which he appears to argue
the conspiracy and bank fraud charges against him should be
dismissed because he did not have the requisite intent.
Fannin has more recently filed a motion for rearraignment in
which he states he wishes to plead guilty to the charges.
Nevertheless, his motion to dismiss must be resolved because
defendant Stone, who is also charged with conspiracy to
commit bank fraud, has moved to join the motion (DE 37) and
the Court will permit her to join it.
regard to the conspiracy charge, Fannin argues that he relied
on Lee's advice that Fannin should ask his daughter to
apply for the loan with the understanding that the funds
would actually be used by Fannin to finish an ongoing
construction project. In an affidavit, Fannin states that he
did not intend to deceive anyone. Instead, he followed
Lee's advice, believing that Lee had superior knowledge
this argument, Fannin appears to be challenging whether there
is sufficient evidence to support the charge in the
indictment that he acted with intent to defraud. Whether a
defendant acted with the requisite intent to commit bank
fraud, however, is a factual matter that a jury must decide.
United States v. Reaume, 338 F.3d 577, 583 (6th Cir.
court will instruct the jury that the indictment is not
evidence and that the prosecution must prove every element of
each offense beyond a reasonable doubt. If the prosecution is
unable to do so, the defendant is entitled to an acquittal.
“However, the prosecution's evidence is tested at
trial, not in a preliminary proceeding.” United
States v. Short, 671 F.2d 178, 183 (6th Cir.1982).
a body of citizens, properly chosen and constituted as a
grand jury, finds probable cause to believe that a crime has
been committed within its jurisdiction, that finding is
sufficient to require a trial.” Id. “[A]
defendant may not challenge an indictment on the ground that
it is not supported by sufficient evidence.” United
States v. Levin, 973 F.2d 463, 468, n.2 (6th Cir. 1992).
also appears to argue that he cannot “as a matter of
law” be deemed to have committed fraud against the bank
because it was a bank official - Lee - who authorized the
transactions at issue. Indeed, Fannin argues, Lee not only
approved of the transactions but “instigated and . . .
assumed complete control and managed” them. (DE 36-1,
Mem. at 3.)
extent that Fannin argues a bank cannot be defrauded as a
matter of law where an employee approves of the fraudulent
transaction at issue, that is incorrect. The “bank as
an entity” is the victim of the fraud. United
States v. Abboud, 438 F.3d 554, 593 (6th Cir. 2006),
Thus, Lee's approval of the allegedly fraudulent
transactions does not relieve Fannin or Stone of criminal
liability for them. Id. (citing United States v.
Rackley, 986 F.2d 1357, 1361 (10th Cir.1993)
(“Defendant confuses the notion of defrauding a
federally insured bank with the idea of defrauding its owner
or directors. It is the financial institution itself-not its
directors or agents-that is the victim of the fraud the
statute proscribes.”) See also United States v.
Selgjekaj, 678 Fed.Appx. 379, 383 (6th Cir.), cert.
denied, 138 S.Ct. 168 (2017) (“The fact that Raguz
regularly assisted others in defrauding his employer, the
Credit Union, does not mean that Defendant did not also
defraud the Credit Union with Raguz's help. It is the
Credit Union, not its agent, Raguz, who is the victim of bank
these reasons, Fannin's motion to dismiss (DE 36) on the
basis that he relied on Lee's advice and authorization of