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United States v. Benchick

United States District Court, E.D. Michigan, Southern Division

June 1, 2015

JOHN S. BENCHICK, Defendant.



On June 13, 2013, Defendant John S. Benchick was charged with three counts of bank fraud in violation of 18 U.S.C. §§ 1344. On October 1, 2013, the government filed a First Superseding Indictment, charging Benchick with a fourth count of bank fraud. The indictment alleges that Defendant “did knowingly and willfully execute, or aided and abetted others in executing, a scheme or artifice to defraud and to obtain money, funds, or other property owned by, or in the custody or control of, federally insured financial institutions by means of material false and fraudulent pretenses, or promises.” (Dkt. # 13.)

Now before the court is the government’s Motion in Limine to Preclude Improper Arguments. (Dkt. # 40.) The government requests that the court: (1) “preclude evidence or argument suggesting that the victim financial institutions invited or could have prevented the fraud;” (2) “preclude evidence or argument that a particular lender subjectively did not rely upon particular misrepresentations or omissions;” (3) “preclude the defendant from referring to the foreclosure crisis and the Government’s actions in seeking to resolve the crisis;” (4) “preclude evidence or argument regarding the unrelated wrongdoing of others;” (5) “preclude the defendant from offering under Rule 801(d)(2) his own out-of-court statements;” and (6) “preclude defendant from introducing the contents of witness interview reports or suggesting that such are the witness’ statements.” (Dkt. # 40, Pg. ID 226.) The matter is fully briefed, and no hearing is needed. See E.D. Mich. LR 7.1(f)(2). For the reasons stated below, the motion will be granted in part and denied in part without prejudice.


In order for the parties to introduce evidence at trial, the evidence must be relevant. “Evidence is relevant if: (a) it has any tendency to make a fact more or less probable than it would be without the evidence and (b) the fact is of consequence in determining the action.” Fed.R.Evid. 401. Relevant evidence is generally admissible, Fed.R.Evid. 402; however, “[t]he accused does not have an unfettered right to offer testimony that is incompetent, privileged, or otherwise inadmissible under standard rules of evidence.” Taylor v. Illinois, 484 U.S. 400, 410 (1988). In particular, the court may exclude evidence from trial that is irrelevant or that is relevant but has “probative value [that] is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” Fed.R.Evid. 403.

Proposed evidence will be deemed relevant if it is probative of one of the elements of the crimes charged in the indictment. “The elements of bank fraud under 18 U.S.C. § 1344 are: (1) the defendant knowingly executed or attempted to execute a scheme to defraud a financial institution; (2) the defendant had an intent to defraud, and (3) the financial institution was insured by the FDIC.” United States v. Kerley, __F.3d __, 2015 WL 1842783, at *11 (6th. Cir. Apr. 23, 2015). Furthermore, the Supreme Court has also held that “materiality of falsehood is an element of . . . bank fraud statutes.” Neder v. United States, 527 U.S. 1, 25 (1999).


A. Evidence or Argument that the Financial Institutions, their Employees, or Agents Invited or Could Have Prevented the Fraud

The government first requests that the court preclude Defendant from presenting evidence or making argument that “an employee or agent of a victim lender bank failed to do the required due diligence to avoid the fraud.” (Dkt. # 40, Pg. ID 228.) The government asserts that such argument would constitute an improper “blame the victim” defense. (Id.)

Defendant concedes that he intends “to present evidence that the institutions themselves . . . had a business model whereby they deliberately refused to verify information presented in loan applications, ” but notes that he does not intend “to introduce evidence of the acts of individual rogue employees, officers or agents. (Dkt. # 41, Pg. ID 249-50.) Defendant asserts that such evidence is relevant because, “[i]f the institutions are not interested in the truth or falsehood of the information upon which they are supposed to make their decisions to lend, then such information cannot be said to have been material to their decision-making.” (Id. at 250.)

In bank fraud cases, courts apply an objective standard to determine the materiality of alleged misrepresentations. As the court explained in its Opinion and Order Denying Defendant’s Motion to Compel Discovery (Dkt. # 28) and its Order Denying Defendant’s Motion for Order Directing the Government to Preserve Certain Evidence (Dkt. # 39), “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.’” Neder, 527 U.S. at 16 (quoting Kungys v. United States, 485 U.S. 759, 770 (1988)). “[A] misrepresentation may be material even if evidence demonstrates that the misrepresentation would not have actually influenced or actually deceived the lender.” United States v. Haiser, No. 2:11-CR-00267-MMD-CWH, 2012 WL 5288006, at *3 (D. Nev. Oct. 24, 2012) (citations omitted).

So long as a defendant, in order to cause a bank to take some action, makes a misrepresentation that a reasonable bank would consider important in deciding whether to act as the defendant wishes . . . the misrepresentation is material, even if the bank does not act as the defendant desires or does not actually rely on the misrepresentation in so acting; [i]t does not lie with one knowingly making false statements with intent to mislead . . . to say that the statements were not influential or the information not important.

United States v. Menichino, 989 F.2d 438, 440 (11th Cir. 1993) (internal quotation marks and citations omitted).

Because materiality is based on what “a reasonable bank would consider important in deciding whether to act, ” evidence suggesting that particular financial institutions implemented insufficient due diligence procedures to detect the alleged misrepresentations has at-most minimal-if any-relevance to establishing the materiality of the alleged misrepresentations. Cf. United States v. Moore, 923 F.2d 910 (1st Cir. 1991) (Breyer, C.J.) (upholding, for charges of conspiracy to fraudulently obtain money from a bank, jury instructions which state, “[I]t is not a defense to claim that the bank might have prevented its losses had it had better ‘internal controls or procedures.’”). This is because “[a] statement or omission is ‘capable ...

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