                FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


UNITED STATES OF AMERICA,                 No. 13-50136
            Plaintiff-Appellee,
                                         D.C. No.
              v.                   2:12-cr-00862-JFW-1

LAWRENCE EUGENE SHAW,
        Defendant-Appellant.               OPINION


      Appeal from the United States District Court
         for the Central District of California
       John F. Walter, District Judge, Presiding

              Argued and Submitted
       November 17, 2014—Pasadena California

                   Filed March 27, 2015

     Before: Mary M. Schroeder, Harry Pregerson,
      and Jacqueline H. Nguyen, Circuit Judges.

              Opinion by Judge Schroeder
2                   UNITED STATES V. SHAW

                           SUMMARY*


                          Criminal Law

    The panel affirmed a conviction for a scheme to defraud
a financial institution, in violation of 18 U.S.C. § 1344(1), in
a case in which the defendant used PayPal to convince banks
that he was a particular bank customer and thus had authority
to transfer money out of that customer’s bank accounts and
into a PayPal account in the defendant’s control.

    The panel held that for a violation of § 1344(1), the
government need not prove that the defendant intended the
bank to be the principal financial victim of the fraud, and that
the district court therefore correctly refused jury instructions
that included such a requirement.


                            COUNSEL

Sean Kennedy, Federal Public Defender, Koren L. Bell
(argued), Deputy Federal Public Defender, Los Angeles,
California, for Defendant-Appellant.

André Birotte, Jr., United States Attorney, Robert E. Dugdale,
Assistant United States Attorney, Tracy L. Wilkison (argued),
Assistant United States Attorney, Los Angeles, California, for
Plaintiff-Appellee.




  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                  UNITED STATES V. SHAW                       3

                          OPINION

SCHROEDER, Circuit Judge:

    Congress enacted the Bank Fraud Act in 1984, and ever
since, the federal courts have grappled with whether its
provisions require proof of an intent to cause harm to the
bank itself. The Act contains two clauses: the first
criminalizes schemes “to defraud a financial institution,” and
the second schemes to obtain bank assets or property under its
control “by means of false or fraudulent pretenses,
representations, or promises.” 18 U.S.C. § 1344. Last year,
the Supreme Court held that the second clause does not
require proof that the defendant intended to defraud the bank.
Loughrin v. United States, 134 S. Ct. 2384, 2387 (2014). In
this case, we deal with the first clause, which by its terms
does require such proof. The question here is whether that
means the government must prove the defendant intended the
bank to be the principal financial victim of the fraud.

    The principal intended victim in this case, at least
according to the defendant, was a bank customer, Stanley
Hsu. The defendant, Lawrence Shaw, had access to the
victim’s bank statements. The gist of Shaw’s scheme was to
use PayPal, an online payment and money transfer service, to
convince the banks that he was Hsu and thus had authority to
transfer money out of Hsu’s bank accounts and into the
PayPal account in Shaw’s control.

    The government charged Shaw with violating § 1344(1).
Shaw sought a jury instruction that, under § 1344(1), the
government had to prove not only that he intended to deceive
the bank, but that he also intended to target the bank as the
principal financial victim of the fraud, rather than the account
4                 UNITED STATES V. SHAW

holder or PayPal. The district court refused to give such an
instruction, concluding that clause 1 required proof only that
the defendant intended to deceive the bank, not that he also
intended the bank to bear the loss.

    While the circuits are divided as to the requirements of
§ 1344(1), our Ninth Circuit case law answers Shaw’s
argument. We have held that, to the extent § 1344(1) requires
any intent to expose the bank to a risk of loss, the requirement
is easily satisfied by the bank’s having to bear some potential
administrative expenses that necessarily result from being
defrauded. See United States v. Wolfswinkel, 44 F.3d 782,
786 (9th Cir. 1995). We did not hold that the bank needed to
be the intended financial victim of the fraud. In this case, a
principal intended financial victim of the fraud was the bank
customer who held the account, and our law has dealt with
that specific situation. We have held that the statute is
violated where the bank is the target of the deception, even if
bank customers were the intended financial victims of the
fraud. See United States v. Bonallo, 858 F.2d 1427, 1429–30,
1430 n.2 (9th Cir. 1988).

    These cases help define the meaning in this circuit of
§ 1344(1)’s element of intent “to defraud,” and establish that
it does not include intent to financially victimize the bank.
That result is fully consistent with the Supreme Court’s
decision in Loughrin, and indeed complements Loughrin’s
holding that § 1344(2) of the statute does not require any
intent to defraud the bank. Section 1344(1) does require
intent to defraud the bank, but neither clause requires the
bank to be the intended financial victim of the fraud. We
therefore affirm the conviction.
                 UNITED STATES V. SHAW                      5

                     BACKGROUND

    The charges in this case arose from a scheme defendant
Shaw devised to take money from bank accounts belonging
to Stanley Hsu, a Taiwanese businessman. Hsu opened a
Bank of America account while working in the United States.
When he returned to Taiwan, he arranged for the daughter of
one of his employees to receive his mail in the States and
forward it to him in Taiwan. Shaw was living with the
daughter and routinely checked her mail. When Hsu’s Bank
of America statements began to arrive, Shaw opened them
and learned Hsu’s account and personal information.

    Shaw used the information from Hsu’s statements to
execute the following scheme: he opened an email account in
Hsu’s name, then used this email account and Hsu’s personal
information to open a PayPal account. Shaw “linked” the
PayPal account to Hsu’s account with Bank of America. He
was able to circumvent PayPal’s security measures because
of his access to the information in Hsu’s bank statements.

    On June 4, 2007, Shaw opened two accounts with
Washington Mutual under the name of his father, Richard
Shaw, without his father’s knowledge or permission. One
account was a savings account (“Tier 1” account), which
Shaw linked to the fake Hsu PayPal account. During the
process of linking the Tier 1 account with the Hsu PayPal
account, PayPal identified the request as suspicious. PayPal
sent an email to the fake Hsu email account asking for
additional information. In response, Shaw faxed PayPal a
copy of Hsu’s Bank of America account statement, and a
bank statement he had altered to appear as if Hsu owned the
Richard Shaw accounts. He also sent a copy of Hsu’s
driver’s license, which he had altered to have a younger birth
6                UNITED STATES V. SHAW

date. On the basis of these falsified documents, Washington
Mutual and PayPal allowed the savings account in the name
of Shaw’s father and the PayPal account in Hsu’s name to be
linked.

    The second account Shaw opened in his father’s name
was a checking account (“Tier 2” account). This account was
linked to the Tier 1 savings account. Shaw’s scheme
ultimately siphoned the funds into a third Washington Mutual
account, a joint account which Shaw had previously opened
in his and the daughter’s name, although without her
knowledge.

    Once the accounts were set up and linked, Shaw began to
withdraw money from Hsu’s Bank of America account
through a series of online transfers and checks written to
himself. He would transfer money from the Hsu Bank of
America account first to the Hsu PayPal account, then
transfer it from the Hsu PayPal account to the Tier 1 savings
account with Washington Mutual. Then, Shaw would
transfer money from the Tier 1 account to the Tier 2 checking
account, which allowed him to write checks to himself,
signing his father’s name. Finally, he would deposit those
checks into the Washington Mutual joint account that he
controlled.

    Using this scheme, Shaw was able to convince the banks
to transfer and release approximately $307,000 of Hsu’s
money to Shaw between June and October 2007. Hsu’s son
discovered the missing money in October 2007, reported the
fraud and closed the Bank of America account.

   Bank of America returned approximately $131,000 to
Hsu, covering the fraudulent activity that occurred within 60
                  UNITED STATES V. SHAW                       7

days of the reported fraud. PayPal reimbursed Bank of
America for this amount. In the end, PayPal bore
approximately $106,000 of the loss and Hsu over $170,000,
because Hsu did not notify the banks of the losses within 60
days of many of the fraudulent transactions, as the parties all
agree was required by standard banking practice.

          DISTRICT COURT PROCEEDINGS

    The government charged Shaw with 17 counts of bank
fraud in violation of § 1344(1) and in December 2012 the
case went to trial before a jury. The defense theory was that
a bank fraud conviction under § 1344(1) requires fraudulent
intent to expose the bank itself to monetary loss, and Shaw
intended only to expose PayPal and Stanley Hsu to any
monetary loss. Shaw argued that “intent to defraud” means
intent to deceive and cheat the bank. Shaw therefore asked
for jury instructions which would require the government to
prove that Shaw had intended the bank to be not only the
target of the deception, but to suffer an actual loss or risk of
loss as the financial victim of the fraud. His requested
instructions provided:

       (1) The defendant knowingly carried out a
       scheme to defraud [the bank]; that is a scheme
       designed to victimize [the bank] by causing
       [the bank], not only Stanley Hsu, monetary
       loss;

       (2) The defendant actively deceived [the
       bank] as to a material fact; that is, a fact that
       had a natural tendency to influence, or was
       capable of influencing, [the bank] to part with
       money or property;
8                 UNITED STATES V. SHAW

       (3) The defendant acted with the specific
       intent to defraud [the bank]; that is, with the
       intent to deceive and cheat [the bank] in order
       to expose [the bank], not only Stanley Hsu, to
       monetary loss.

       (4) [The bank] was federally insured by the
       FDIC.

       It is not enough for the government to prove
       that Mr. Shaw carried out a scheme to obtain
       Mr. Hsu’s money by deceiving [the bank]. In
       order to convict Mr. Shaw, you must find that
       [the bank] itself was both the target of his
       deception and an intended victim of the fraud.

    The district court declined to give Shaw’s requested jury
instructions. The district court concluded that risk of loss was
an element that the bank fraud statute did not require, and that
the bank need not be an intended financial victim of the fraud.
Instead, the trial judge gave instructions based on a
combination of model jury instructions and instructions used
in previous bank fraud cases in the Ninth Circuit. The judge
instructed the jury that:

       [i]n order for the defendant to be found guilty
       of bank fraud, the government must prove
       each of the following elements beyond a
       reasonable doubt:

       First, the defendant knowingly executed a
       scheme to defraud a financial institution as to
       a material matter;
                UNITED STATES V. SHAW                   9

      Second, the defendant did so with the intent to
      defraud the financial institution; and

      Third, the financial institution was insured by
      the Federal Deposit Insurance Corporation.

      ....

      The phrase “scheme to defraud” means any
      deliberate plan of action or course of conduct
      by which someone intends to deceive, cheat,
      or deprive a financial institution of something
      of value. It is not necessary for the
      government to prove that a financial
      institution was the only or sole victim of the
      scheme to defraud. It is also not necessary for
      the government to prove that the defendant
      was actually successful in defrauding any
      financial institution.      Finally, it is not
      necessary for the government to prove that
      any financial institution lost any money or
      property as a result of the scheme to defraud.

      ....

      An intent to defraud is an intent to deceive or
      cheat.

The jury convicted Shaw of 14 counts of bank fraud on
December 13, 2012, and this appeal followed.
10                UNITED STATES V. SHAW

                        DISCUSSION

     The bank fraud statute, 18 U.S.C. § 1344, provides:

        Whoever knowingly 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;

        shall be fined not more than $1,000,000 or
        imprisoned not more than 30 years, or both.

In Loughrin v. United States, the Supreme Court construed
the second clause, and held that it does not require the
government to prove that the defendant intended to defraud
the bank. 134 S. Ct. 2384, 2387 (2014). Section 1344(2)
targets schemes to obtain property held by the bank via
misrepresentation to a third party, while § 1344(1) penalizes
schemes to defraud the bank itself. See id. at 2389–92. The
Supreme Court effectively required courts to treat the two
clauses separately, holding that while they overlap
substantially, the clauses are disjunctive and establish distinct
offenses. Id. at 2390, 2390 n.4.

    In holding that the two clauses create separate offenses,
the Court rejected the reasoning of the Third Circuit. See id.
at 2388–89. The Third Circuit held that clauses 1 and 2
                  UNITED STATES V. SHAW                     11

conjunctively create only one offense, and thus all violations
of the statute require both the intent to defraud the bank and
that the bank be exposed to a risk of loss under the relevant
law. United States v. Thomas, 315 F.3d 190, 199–201 (3d
Cir. 2002) (holding that under both clauses, “a defendant
must intend to cause a bank a loss or potential liability,
whether by way of statutory law, common law, or business
practice” (internal quotation marks omitted)). The Supreme
Court expressly held that § 1344(2) does not require either
intent to defraud a bank or a risk of loss to a bank. Loughrin,
134 S. Ct. at 2389–90, 2395 n.9. In doing so, it emphasized
that intent to defraud a bank is the essence of § 1344(1). Id.
at 2389–90.

    Shaw’s argument in this case therefore focuses on the
difference between the two clauses. He points out that the
second clause covers schemes intended to obtain a third
party’s property. He argues that the first clause, under which
he was convicted, therefore must require that a defendant
intend to obtain the bank’s property. Thus, he asks us to
conclude that a conviction under § 1344(1) requires a
showing that the defendant intended to expose the bank to the
principal risk of loss. Such a requirement was not satisfied
since, in this case, Shaw intended his principal target to have
been the bank’s customer, Hsu.

    Shaw thus seeks to characterize the difference between
the two clauses as involving the intended financial victim of
the fraud, i.e., the intended bearer of the loss. The language
of neither clause of the statute, however, refers to monetary
loss or to the risk of such loss. The statutory language
focuses on the intended victim of the deception, not the
intended bearer of the loss. Section 1344(1) requires the
intent to deceive the bank. Section 1344(2) requires false or
12                UNITED STATES V. SHAW

fraudulent representations or pretenses to third parties. The
Supreme Court made this point in Loughrin when it noted
that the second clause was intended to broaden the scope of
bank fraud to include schemes that did not involve deception
of the bank directly, such as schemes to use stolen credit
cards. See 134 S. Ct. at 2391–92. Section 1344(1) thus
covers schemes to deceive the bank directly. Neither clause
requires the government to establish the defendant intended
the bank to suffer a financial loss.

     Analysis of our circuit’s law before Loughrin counsels the
same result. In United States v. Bonallo, 858 F.2d 1427 (9th
Cir. 1988), we recognized that under § 1344(1) the bank itself
need not be the sole or primary victim of the scheme. Rather,
the bank is defrauded within the meaning of § 1344(1) when
it is the target of the deceit, even if the scheme targeted the
bank’s customer accounts as the source of the money. See id.
at 1434 n.9.

    In Bonallo, a bank employee withdrew funds from his
own account via the ATM, then manipulated the bank’s
computer system to charge the withdrawals against other
customers’ accounts. Id. at 1429–30. The defendant argued
that the other customers were the intended victims of his
scheme and therefore the bank was not defrauded within the
meaning of the statute. We rejected this argument, finding
that the bank was the target of his misrepresentation, even if
the customers’ accounts were the source of the funds. See id.
at 1434 n.9. In short, the defendant was guilty of bank fraud
because he intended to deceive the bank.

   In United States v. Wolfswinkel, 44 F.3d 782 (9th Cir.
1995), we considered whether a risk of financial loss to a
bank was as an element of § 1344(1). We held that even if
                  UNITED STATES V. SHAW                      13

there were such a requirement of financial loss to the bank, it
was easily satisfied. The defendant was convicted of bank
fraud under § 1344(1) after he engaged in a check-kiting
scheme, during which he convinced a bank officer to sell him
cashier’s checks paid for with insufficiently-backed checks.
Id. at 784. On appeal, Wolfswinkel argued that the
government had to show he exposed the bank to a risk of loss
under § 1344(1), and he had not, because he provided
collateral to the bank to secure any losses for the bounced
checks. Id. at 785–86.

    In affirming Wolfswinkel’s conviction, we recognized a
circuit split as to whether § 1344(1) requires proof of risk of
loss to the bank to establish the defendant’s intent to defraud.
Id. at 786. We held, however, that even assuming there were
such a requirement, Wolfswinkel’s scheme satisfied it. See
id. Although he had provided security for potential losses,
Wolfswinkel exposed the bank to a risk of loss in the form of
administrative costs and the threat of competing creditor
claims if it were forced to liquidate the collateral. Id. The
defendant need not have intended the bank to bear the risk of
losing the amount involved in the financial scheme itself.

    The Supreme Court’s decision in Loughrin does not affect
the validity of our precedent, or undermine it in any way. If
anything, it lends credence to our reluctance to impose any
risk of loss requirement in a prosecution under the bank fraud
statute. Loughrin confirms our conclusion that the difference
between the two clauses is which entity the defendant
intended to deceive, not which entity the defendant intended
to bear the financial loss. See 134 S. Ct. at 2389–90
(emphasizing that nothing in § 1344(2) requires specific
intent to deceive a bank, which § 1344(1) already covers).
14                 UNITED STATES V. SHAW

     Shaw stresses that under the applicable law, the bank, in
the end, did not actually lose anything. The losses ultimately
fell on Hsu for failing to spot much of the fraud within the
legally required 60 days, and on PayPal, which had to
reimburse the bank for the rest. Shaw therefore asks us to
conclude that he could not have intended to defraud the bank.
A similar argument with respect to clause 2 was dismissed
summarily in Loughrin on the ground that the federal statute
was intended to avoid having cases turn on the technical
ramifications of banking law. Id. at 2395 n.9. In
characterizing § 1344(2), the Court said that the language
“appears calculated to avoid entangling courts in technical
issues of banking law about whether the financial institution
or, alternatively, a depositor would suffer the loss from a
successful fraud.” Id. We conclude that the same legislative
intent must be ascribed to § 1344(1). There is no reason to
believe Congress wanted courts to become more entangled in
such technical issues under the first clause than under the
second clause.

    We recognize that some circuits have held that risk of
financial loss to the bank is an element that must be proven
under § 1344(1). See, e.g., United States v. Staples, 435 F.3d
860, 866–67 (8th Cir. 2006) (discussing difference of opinion
among circuits on whether intent to harm or cause the bank
a risk of loss is required). The reason given is that the
purpose of the statute is protection of the federal fisc, and that
purpose is not served if the bank faces no financial risk. See,
e.g., Thomas, 315 F.3d at 201. Circuits adopting the
requirement cite to the legislative history of the bank fraud
statute, which shows that Congress enacted it because of the
“strong federal interest in protecting the financial integrity of
[federally insured financial] institutions.” See, e.g., id.
(quoting S. Rep. No. 98-225, at 377 (1984), reprinted in 1984
                  UNITED STATES V. SHAW                      15

U.S.C.C.A.N. 3182, 3517.); United States v. Nkansah,
699 F.3d 743, 759 (2d Cir. 2012) (same). But requiring proof
of intent that a bank bear a risk of loss does not serve this
end. The entity that bears the risk of loss does not necessarily
depend upon the entity (i.e., the federally insured financial
institution) that the defendant intends to harm. It depends on
the operation of banking laws that, as this case demonstrates,
may result in having the instruments of the fraud, like the
bank’s customers or entities like PayPal, ultimately bear the
loss. A scheme that is intended to harm third parties may, in
fact, end up hurting the bank, and vice versa. Few criminals
have any knowledge of the rules of law that govern which
entity bears the risk of loss. Requiring intent to harm the
bank only makes it more difficult to prosecute bank fraud.
Nkansah, 699 F.3d at 759 (Lynch, J., concurring); see also
Loughrin, 134 S. Ct. at 2395 n.9 (citing Nkansah concurrence
with approval).

    The Court in Loughrin held that § 1344(2) does not
require intent to defraud a bank because the plain language of
that section includes no such requirement. 134 S. Ct. at
2389–2390. We similarly decline to read an additional
element into § 1344(1) that Congress did not include; that
does not serve the Congressional purpose; and that could
needlessly entangle judges and juries in the intricacies of
banking law. The district court correctly refused instructions
that included such a requirement.

   AFFIRMED.
