Wednesday, February 7th, 2007

No Error in Indictment’s Failure to Allege Materiality in Bank Fraud Prosecution

United States v. Dayan, Docket Nos. 05-3443-cr (L), 05-4199-cr (CON) (2d Cir. Feb. 5, 2007) (Kearse, Winter, Walker): This short opinion rejects Dayan’s claim that his indictment, charging him with conspiracy to commit bank fraud and several substantive counts of bank fraud, was defective because it failed to state that his frauds were “material,” an element of the offense. In Neder v. United States, 527 U.S. 1, 25 (1999), the Supreme Court ruled that although the bank fraud statute, 18 U.S.C. § 1344, does not contain the word “material,” materiality was nonetheless an element of the offense “because the word fraud incorporated fraud’s ‘well-settled meaning at common law’ — a ‘misrepresentation or concealment of material fact.'” Op. 5 (quoting Neder) (emphasis in original). Using the same reasoning, the Circuit rejects Dayan’s claim: “If materiality can be inferred to be an element of criminal fraud because of the well-understood meaning of ‘fraud’ as a legal term, an allegation of materiality can be inferred from the use of the word ‘fraud’ in the indictment.” Op. 5-6. And since it is “commonly understood among both lawyers and laypersons” that “materiality of the misleading conduct or speech [at issue] is [] at the heart of the word ‘fraud,'” there is no error in the indictment’s failure to allege materiality. Op. 6.

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