U.S. v. Munksgard, Eleventh Circuit Court of Appeals, Filed January 30, 2019: False Statements to Obtain Bank Loans

In U.S. v. Munksgard, the Eleventh Circuit Court of Appeals affirmed Munksgard’s conviction for knowingly making false statements to obtain bank loans.

Although Munksgard admitted to knowingly making false statements on four occasions in order to obtain bank loans, he appealed his convictions because the government did not prove an essential element of the crime – that the bank was FDIC insured.

Well, the Eleventh Circuit says that the government did prove that the bank was FDIC insured. And, as far as Munksgard and his conviction are concerned, it was proven. A careful reading of this opinion, as well as the dissent, reveals, however, that the majority opinion engages in some high-flying legal acrobatics to come to that conclusion.

What does the government have to show to prove that a bank was FDIC insured, and why is the majority opinion wrong?

The FDIC Insurance Requirement

The government must prove that the bank or other financial institution was FDIC insured in several types of cases, including bank fraud, making false statements to obtain bank loans, or federal bank robbery charges.

Because it is an element of the crime, if the government does not prove that the institution was federally insured, the defendant cannot be convicted by a jury.

What Evidence Does the Government Need to Prove a Bank is FDIC Insured?

Under the reasoning in the Munksgard case, the government doesn’t have to prove a bank is federally insured.

Why not?

Because they found, as have other appellate courts, that there is a “universal presumption… that all banks are federally insured.” Although the jury was never informed of this presumption, the Eleventh Circuit finds that this is a basis to affirm the convictions.

If there is a presumption that all banks are federally insured, then the government does not have to prove that a bank was federally insured to get a conviction, although the defendant can introduce evidence to rebut the presumption and prove that a bank was not federally insured.

That’s called burden shifting – it’s unconstitutional and unacceptable in a context where the evidence of FDIC insurance is readily available to the government. It also negates an essential element of the crime that was mandated by the legislature – the appellate courts are changing the elements of the crime, removing an element for no reason other than to make the government’s job easier.

What Evidence of FDIC Insurance Did the Government Provide?

The evidence introduced at trial, like many other cases where the appellate courts have admonished prosecutors to “do better” at proving the FDIC requirement as they affirm a defendant’s conviction, consisted of testimony from a single witness that:

• The bank was covered by FDIC insurance when it was initially chartered in 1990;
• The bank was covered by FDIC insurance at the time of Munksgard’s trial; and
• The FDIC insurance certificate did not have to be renewed.

That is good enough for the Eleventh Circuit:

…what the government presented here was good enough. First, the government introduced a certificate of FDIC insurance issued when Drummond Community Bank was initially chartered in 1990—evidence (in Wigmore’s terms) of “prior existence.” Eleventh, David Claussen, Drummond’s Senior Vice President and Chief Underwriter, testified that the bank was insured at the time of trial in 2016—“subsequent existence.” Finally, when asked whether Drummond’s FDIC certificate is renewed “every so often,” Claussen—who had spent 25 years at the small bank, and was therefore likely to be familiar with its administration and operations—testified that it isn’t.

Why is the Eleventh Circuit Wrong?

The facts that 1) a bank was insured over 20 years ago, and 2) a bank is insured at the time of trial, do not prove that the bank was insured at the time of the alleged offense. They prove that 1) the bank was insured over 20 years ago, and 2) the bank was insured at the time of trial.

FDIC insurance could lapse for reasons other than a need to renew the certificate – what if the bank failed to pay its premium and the insurance lapsed for a period of time? What if the bank failed to meet the requirements for FDIC insurance and the insurance was canceled until they corrected the issues?

Did the witness clearly state that the bank was insured at the time of the offense? If so, that fact isn’t included in the Eleventh Circuit’s opinion. Why didn’t he state that? If the bank was insured at the time of the offense, why didn’t the prosecutor present a certificate saying so?

It would be simple enough for the government to obtain and present to the jurors a certificate of FDIC insurance that covered the dates of the alleged offense. If they did not, and the bank officer who testified did not state that the bank was insured, I think it would reasonable to presume that the bank was not insured at the time of the alleged offenses.

Why Don’t Prosecutors Go the Extra Mile to Prove a Bank is FDIC Insured?

Why don’t prosecutors take the time to prove that a bank is FDIC insured? It’s because they don’t have to.

If the appellate courts do not reverse convictions, prosecutors will keep doing what they are doing. The Court goes out of their way to unconvincingly chastise the prosecutors, with a cutesy warning – “You are (as the author’s mother used to say) cruisin’ for a bruisin’. Don’t apologize—do better.”

Then, the Court goes on to point out that the government met their burden of proof. Oh, and they don’t really have the burden of proof anyway, because there is a “universal presumption” that all banks are federally insured:

Considering all of the evidence, the government proved beyond a reasonable doubt that Drummond Community Bank was insured by the FDIC both before and after Munksgard’s offenses and that it didn’t need to renew its insurance in the interim. Coupled with the “universal presumption . . . that all banks are federally insured…”

Why would any prosecutor bother to get a certificate of FDIC insurance and present it to a jury, when the appellate courts are telling them it is totally acceptable not to bother?

Federal White Collar and Criminal Appeals Attorney in Columbia, SC

Elizabeth Franklin-Best is a federal criminal defense and federal appellate lawyer in Columbia, SC who defends white-collar criminal cases.

For more information, call us at (803) 331-3421 or contact us through our website to set up a consultation about your case.