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Target Fraudster Challenges Bank Fraud Law

Written By Brian Hicks

Posted April 2, 2014

In the United States, it doesn’t matter if you are a criminal or not, you can challenge the federal government and its courts. It’s what makes America so interesting at times, and so frustrating at others. target storefront

There aren’t too many countries where a fraudster can actually challenge the very law condemning him.

The fraudster we’re speaking of is Kevin Loughrin. This man came up with a scheme to defraud Target, but the courts view it as a scheme to defraud the banks instead.

He says he absolutely was not causing banks to lose money, only Target. The federal government is saying it’s all the same under existing statutes.

Target Theft or Bank Fraud?

Loughrin came up with a “brilliant” scheme that began with stealing people’s personal checks from their mailboxes when they arrived. He and his accomplice would then alter the checks and use them at their local Target. They would subsequently go back to Target to return the merchandise for a cash refund.

It’s similar to what shoplifters do, except they were replacing theft with check fraud. They got away with $1,184 worth of returns.

For this $1,184, Loughrin was convicted of bank fraud, mail theft, and identity theft through the United States District Court for the District of Utah. He appealed, saying that he didn’t commit bank fraud, which is the most serious of the convictions.

The government says that Loughrin is guilty of bank fraud because under the statute, he did not cost the bank any money.

The statute he’s referring to is 18 U.S.C. § 1344, which says there will be a sentence of up to 30 years in prison for anyone who:

“[K]nowingly 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.”

Loughrin says that he did not defraud a financial institution. He admits to defrauding Target. His legal council argues that he didn’t get the money from a bank, but from innocent individuals and Target.

The U.S. Supreme Court met on Tuesday to discuss the scope of the statute. Nine justices spent one hour listening to the argument of why Kevin Loughrin did not commit six counts of bank fraud.

The federal prosecution’s argument is that they are entitled to pursue any case in which a check is involved. Since Loughrin used a check, the banks were directly involved, and thus they see that as fraud against a bank.

Loughrin’s council won’t let go of the fact that he didn’t cost the bank anything when he used the checks. The money comes from the individuals he stole the checks from, not the banks.

In some respects, this is a strong point. It’s just crazy that a criminal is able to send the U.S. Supreme Court into a debate about whether they should change a statute that worked perfectly well for three decades.

If Loughrin has his sentence lessened because of this, his scheme may end up being in the tool belt of many others who seek ways to defraud institutions (financial or not). A legal precedent will have been set that limits the scope of federal prosecution for check fraud. Stealing personal checks, therefore, could end up carrying less severe consequences.

It’s interesting, isn’t it? Loughrin may not have made millions from his scheme, but he sure has cost the government money in taking the time to reassess the scope of the fraud law for banks.

Many people would see that has a crime in itself.