Supreme Court Begins Term With Crime and Punishment

Who is really being defrauded? The bank or its customer?

What was the jury thinking?

Photographer: Jamie Rector/Bloomberg

The first Monday in October this year is also the first day of Rosh Hashana -- so oral arguments for the new Supreme Court term will begin instead on a Tuesday. Chief Justice William Rehnquist, who was reputedly unsympathetic to Justice Ruth Bader Ginsburg’s request to turn the court’s Christmas party into a holiday party, must be spinning in his grave. But Rehnquist’s former law clerk, Chief Justice John Roberts, is apparently more ecumenical -- and it’s a different era, with three Jews on the court and a fourth nominated to it.

Nevertheless, the Jewish New Year is two days long (or, one long day according to the rabbis). And perhaps it’s appropriate that on the day when, according to tradition, God sits in judgment of his flock, the court will consider one case about crime and one about punishment. The first is about whether it’s federal bank fraud to rip off a customer rather than the bank itself. And the other, more subtle case is about whether double jeopardy allows charges to be retried when the original jury acquittal was logically irrational.

Shaw v. U.S., the bank fraud case, is largely a matter of statutory interpretation. It’s against federal law to “defraud a financial institution.” Lawrence Shaw got access to Stanley Hsu’s bank account and planned to use PayPal to convince banks that he was Hsu in order to transfer the money to himself. When Shaw was convicted of bank fraud, he argued that he wasn’t trying to defraud the banks -- just Hsu.

The U.S. Court of Appeals for the 9th Circuit decided against Shaw and for the government. It reasoned that the part of the law that criminalizes defrauding a financial institution says nothing about who suffers the loss. Shaw certainly meant to lie to the banks to get Hsu’s money. That was enough to make it bank fraud, according to the court.

The alternative view, adopted by some other circuits, is that the purpose of the law is to protect the Treasury, which might have to compensate federally insured banks for their losses but wouldn’t have to repay private customers. According to this purpose-driven view, it makes no sense for the law to cover fraud that doesn’t pose any financial risk to the banks.

In general, it’s preferable to interpret laws according to their purposes, not their literal language. What’s more, the so-called rule of lenity, favored by the late Justice Antonin Scalia, calls for reading ambiguous criminal laws to the benefit of defendants, not the state. Lenity is akin to mercy, a divine attribute much needed around the Days of Awe.

Yet in this instance, it seems a little strange to restrict bank fraud to crimes that happen to harm the bank rather than its customers. Ultimately, a bank will suffer if its customers are ripped off. And the law surely ought to protect consumers as much as the federal fisc.

The other case, Bravo-Fernandez v. U.S., involves a weird factual situation that implicates the constitutional right against double jeopardy.

In essence, the double jeopardy right says that when a jury has rejected the facts that would be necessary to convict you of a crime, you can’t be made to stand trial again in a case where another jury might reach different factual conclusions.

If the new charge is identical to the old one or substantially similar, it’s easy to see the double jeopardy.

But when the charge is a bit different, a court has to do some figuring. Specifically, according Supreme Court precedent, the court is supposed to decide whether the second charge involves facts that have already been determined in favor of the defendant. The court is supposed to ask “whether a rational jury could have grounded its verdict” on something other than the facts that the defendant doesn’t want relitigated. If the original jury verdict might have rested on different factual conclusions, there’s no double jeopardy problem.

But what if a jury has found a defendant guilty of a charge but that conviction is vacated on legal grounds? Can the vacated guilty verdict be used to shed light on what the jury was thinking in the first place?

In the Bravo-Fernandez case, the defendants, a Puerto Rico senator and the president of a private security firm, flew from San Juan to Las Vegas to watch a prize fight. The government alleged that the trip was part of a pay-off scheme. The jury convicted the men of bribery but acquitted them of the separate crime of traveling in interstate commerce for the criminal purpose of engaging in federal bribery.

The U.S. Court of Appeals for the 1st Circuit vacated the convictions. The government sought retrial on the bribery act violation.

The defendants argued that they couldn’t be retried because they had been acquitted of the traveling-to-commit-bribery charges. The government rejoined that they had been convicted of bribery anyway, so the jury must have thought bribery occurred. Hence there was no double jeopardy. To this, the defendants said that vacated convictions shouldn’t be used to determine what the jury was thinking.

The issue for the Supreme Court is whether the vacated conviction can cancel out the acquittals and authorize a second trial.

If all this sounds abstruse, think of the case this way: Should double jeopardy turn on a minute inquiry of what the first jury believed? Or should the government be unable to rely on an invalid conviction to make that determination?

The answer should be that the government can’t use invalid convictions to make its case. An invalid conviction isn’t an acquittal, to be sure. But it also shouldn’t be treated as evidence of what the jury thought, precisely because it involved legal error.

The defendants should get off, not for their own sakes, but to protect the integrity of the legal system against the use of invalid verdicts to help the government put people in jail.

As the Bible puts it in a line that figures in the New Year’s liturgy: Shall the judge of all the earth not do justice?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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