Rov_Scam
7hr ago
Yeah, I'll get to the question later. I've been working quite a bit and didn't have time to give a proper answer. Hopefully I'll get to it later today.
Rov_Scam
7hr ago
If there's case law suggesting that it applies to opening a checking account, I'll concede the point. But that doesn't mean there's criminal liability in this case, because we still have to meet the elements of the crime. As @odd_primes points out, there are three elements:
I get why 1 and 2 would seem self-evident, but it isn't clear to me whether either of these prongs have been met. The alleged false statements were contained in documents called "Sole Proprietorship Resolution of Authority", which stated, for each of the at-issue accounts:
The evidence that they present of these statements being false is that, following an investigation by the bank, the accounts were closed and the SPLC had a discussion with the bank memorialized in a letter stating that the accounts were opened for the benefit of SPLC operations and under their authority. The confusion here arises from the difference between legal ownership and beneficial ownership. To cite an example that explains the difference, we'll go with one I'm familiar with, the lawyer trust account.
Suppose a client hires my law firm to handle a commercial real estate transaction worth several million dollars. They give me a check for 5 million dollars so that when the closing date arrives, I will have the cash on hand and be able to pay the seller. In the meantime, though, there will be due diligence and continuing negotiations, and the actual closing date may be several months from when the client gives me the money. I can't just deposit the check in my firm's operating account, because it's not mine to spend, and comingling client funds with my own would get me in trouble. Since the money is likely to generate a non-negligible amount of interest during the time the transaction is pending, I have to open up a client trust account with a bank so that the client doesn't lose anything because of the delay. I am legally responsible for this money and I'm legally the only one with the authority to spend it. But the only way I can spend it is by paying the seller of the property, and if the deal falls through I have to return it, along with any interest it accrued. I am the legal owner, and the client is the beneficial owner.
This distinction comes up a lot in the context of contemporary FinCen and KYC regulations because criminal enterprises will often try to hide behind webs of LLCs. The LLC is the legal owner of the money, but since the LLC has an owner, that owner is the beneficial owner. So If I start a single-member LLC it's easy because I'm the beneficial owner. It gets more complicated when the LLC in question is owned by other LLCs, which are in turn owned by other LLCs, and it takes a day on the Secretary of State's website and lots of money spent ordering incorporation documents that are on microfilm in order to figure out who the physical person is behind everything. The implication that the prosecution appears to be making here is that since the accounts were being used for SPLC purposed, the SPLC was actually the beneficial owner of the accounts, and the statements that the employee was the sole owner of the accounts were therefore false.
There's one problem with this theory, though—sole proprietorships do not have beneficial owners. All a sole proprietorship is is a business name that an individual uses. There is no separate corporate structure apart from the individual. The way counties record them is instructive, either as "fictitious names" or "doing business as". e.g. Robert T. Beck dba Beck Paving Company. The idea of a sole proprietorship having a separate beneficial owner is similar to the idea of an individual having a separate beneficial owner. For that reason, all the various regulation that's been put in place over the years regarding disclosure of beneficial owners doesn't apply to sole proprietorships. The point of the Resolution of Authority is to certify to the bank that you are the person legally authorized to open the account, and to appoint agents who will have access the account. A beneficial owner does not have this authority; if I open a client trust account the client doesn't have any authority to access the account or to designate agents. The same is true for an LLC. If there is a web of legitimate LLCs, and the one I'm in charge of running is owned by another LLC with a different board and different management four layers above, those owners/managers can't open bank accounts in their capacity as beneficial owners. If you look at Resolutions of Authority for LLCs, they don't ask about beneficial ownership at all; in fact, they don't ask about ownership at all. All they ask is for the person opening the account to affirm that they have been authorized to open the account and to provide paperwork to that effect.
Assuming that the person who opened the accounts was indeed the legal owner of the sole proprietorships, and the indictment doesn't suggest that he wasn't, you have imply that the language in the Resolution of Ownership implied that it was also refering to some type of beneficial ownership, which wouldn't make any sense. Now, one could make the argument that due to some kind of collateral agreement between the legal proprietor and the SPLC that some sort of beneficial ownership did exist. I can't find any law suggesting that such an arrangement is possible; maybe you can. But even then, in order to prove that the statement was a lie, you'd have to prove that the bank contemplated such an interpretation at the time, and it's highly unlikely that the government has such proof, since the nature of the paperwork they are using as evidence isn't used to determine beneficial ownership even when a beneficial owner who would not appear on that paperwork could theoretically exist. And that still doesn't get you all the way there, because that only gets us to the second prong, that the person opening the account interpreted it this way as well, and thus knew they were making a false statement. If someone asks you if you own a company without any qualification, and you are the only legal owner, and you say yes, you can't say they knew they were lying because some obscure interpretation that you weren't made explicitly aware of exists which would make the statement untrue.
And we haven't even gotten to the third prong yet, and it's likely to fail here as well, that the false statement was made to mislead the bank. It's unclear why the person opening the account would have a motive to mislead the bank. In the case you cited, it was clear that the guy was trying to mislead the bank because he was using the accounts to deposit checks made out to somebody else. The indictment alleges that the accounts in the present case were used to mislead third parties as to the source of the funds, but that isn't an element of the offense. The SPLC had its own account with the same bank, and there's nothing in the indictment to suggest that the bank would have refused to open the accounts had they known that the SPLC was behind them, or that the employee who opened them was deliberately trying to conceal their purpose. This is the weakest argument, since one could argue that any false statement was made to mislead the person to whom it was made, but it would take a miracle to even get this far, and such an implication is just as weak for the prosecution.
No, but if you want to split that particular hair then it works both ways. Where on the SPLC website did it say they wouldn't give money to a particular group? That's beside my point though, which is that the language is simply too vague to prove fraud. Look at a typical fraud case: I tell you that if you invest your money with my firm I'll put it in the stock market, and you chose a few funds to invest in. In the meantime, I use your money to make loans to my son's unsuccessful woodworking business, and I produce fraudulent statements showing the amount of money you would have had if I had invested the way I told you I was going to. In other words, there was a clear promise that I would do something, made to you in particular, you relied on that promise, and you can imply from the circumstances that I never intended to invest your money the way I promised. That's a very different circumstance than a general statement made on a website that you can't prove that any individual donor actually saw, let alone relied upon. In the nonprofit environment, misusing restricted funds comes looks a lot more like traditional fraud than using general funds that may be at odds with what is said on a website, in that you made a specific promise to a specific donor to use funds a certain way, and then used them for something else. And even in those cases, the result isn't a fraud prosecution, but a civil suit from the state AG to recover the money, and possibly loss of tax status.
Look, I don't have much love for the SPLC, would never consider giving them money, and I understand your arguments. But I'm not willing to squint hard enough to believe that this indictment is any more than an attempt to spin straw into gold.
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