United States v. Donald E. Jacobs

Donald E. Jacobs appeals Ms convictions and sentences for conspiracy, bank fraud and mail fraud. 18 U.S.C. § 371; 18 U.S.C. § 1344; 18 U.S.C. § 1341. After a jury trial Jacobs was sentenced to 51 months on each count, to be served concurrently. He now argues that letters from his attorney were admitted into evidence in violation of his attorney-client privilege, that the banks affected were never exposed to a risk of loss as required by the statute, that the judge erred in instructing the jury on conscious avoidance and that the district court improperly calculated his sentence under the Sentencing Guidelines. We affirm.

I. Factual Background

Donald Jacobs apparently had a penchant for activities on the edge of legality. Jacobs was engaged in efforts to avoid taxes through the use of off-shore banking and by ownership of off-shore corporations. His involvement in these off-shore activities began at various seminars, where he met the other participants in the somewhat different scheme that has led him to Ms present straits. Jacobs was involved in a so-titled “Debt Elimination Program,” in wMch unwitting debtors were enticed to purchase “certified drafts” drawn on non-existent financial entities in Mexico. First, the targeted debt- or would obtain an exact accountmg from the creditor to whom the debtor owed money. Then the debtor would give tMs information to one of Jacobs’ “down-line” distributors along with a fee of about 15% of the total debt owed. In return, the debtor would receive an official-looking, but worthless, piece of paper purporting to be a “certified draft,” drawn on a fictitious financial institution, with a face value equal to the debt owed. Along with this, the debtor received instructions to submit the draft to the creditor, together with a demand for the return of any collateral or evidence of mdebtedness. Banks would accept the draft, but following sound banking practice, would decline to release the collateral until the draft cleared, which, of course, never happened. Thus, the debtor was out the 15% of face value paid for the draft, and the bank was out whatever expenses it incurred attempting to collect on the draft. The debtor would often be responsible for late fees and accrued interest as well as for the origmal balance.

Jacobs was convicted of one count of conspiracy to create fraudulent certified drafts with the intent to market the drafts to customers in the Debt Elimmation Program (DEP). Jacobs was also convicted of 30 counts of bank fraud for Ms attempt to defraud federally insured financial institutions through the DEP. Each count of bank fraud reflected the submission of one certified draft to a financial institution. Jacobs was also convicted of mail fraud, each of these eighteen counts arising from the mailing of one certified draft to be handled by the United States Postal Service.

Jacobs now appeals his conviction, alleging that privileged communications between his attorney and himself were improperly and prejudicially admitted into evidence, depriving him of a fair trial. He also appeals the application of the bank fraud statute to a situation where he claims the banks had no risk of loss. He further challenges the calculation of “loss” for sentencmg purposes. Finally, he claims that a jury instruction on conscious avoidance was erroneous.

Jacobs became associated with the DEP while attending an off-shore investment seminar in Acapulco, Mexico, in March of 1987. This seminar, which focused on off-shore banMng, was hosted by Happy Dutton and attended by Paul Robinson. Paul Robmson, *86 who also went by the names “Walter Martin,” “Ed Lee,” “Paul Martin” and “Lean-dro,” was invited to the seminar after Dori Dutton (Happy’s daughter) found his name on a tax protestor mailing list. Paul Robinson appears to be the “brains” behind the DEP; he introduced the scheme to Happy Dutton, who in turn hand-picked various individuals from the seminar to be “leaders.” At the same time that the DEP scheme was getting off the ground, Happy Dutton continued her business running seminars on offshore banking and off-shore corporations. In order to be a “leader” in the DEP, Jacobs was required to hold a seminar, which he scheduled for June 1987, in Cincinnati.

While in Acapulco, Jacobs obtained a Mexican driver’s license and a Mexican social security card in a juristic name. The address given for these documents was the same address that appeared on the certified drafts as the drawee bank’s address — a post office box in Mexico. Jacobs knew that the purchase price of the drafts (15% of their face value) was being entirely consumed by commissions for the various participants in the scheme, including 5% (or one-third of the purchase price) for the leader (e.g., Jacobs) and his sales associates (or “downline” people). In addition, there was 5% for Happy Dutton and 5% for Paul Robinson (under the name, “Paul Martin”). By April of 1987 Jacobs was well on his way to registering people to attend his Cincinnati seminar and was attempting to entice people to purchase certified drafts. Testimony also showed that the DEP was discussed at Jacobs’ seminar. About this time Jacobs requested that his attorney, Jay Swob, investigate the DEP and give him his opinion of its merits. Attorney Swob wrote Jacobs two letters, one on May 28, 1987, and one on July 12, 1987. Each of these letters discussed the many potential problems associated with the DEP, explained the legal liabilities that could flow from them, and strongly advised Jacobs to have nothing to do with the DEP.

After the Cincinnati seminar, things began to pick up for Jacobs. In July 1987, Jacobs (under the name, “JMR Group”) presented the DEP to a group of people in Cincinnati. One of those attending was given a document prepared by Jacobs, providing, as the following quotation indicates, that direct involvement in the DEP was initially limited to those individuals who had been trained by attending Jacobs’ Cincinnati seminar:

To Prospective Debt Elimination Program Participants:

1. The JMR Group must initially limit its direct involvement to those individuals who have already been trained by attending the training meeting conducted in Cincinnati on June 9,1987. These people paid to obtain a head start and they deserve our first priority.

By October of 1987, Jacobs was recognized as the number one producer in the DEP scheme. He received an award for his productivity. He was also involved in developing variations on the scheme, including a plan to purchase gold with the drafts. Jacobs anticipated purchasing so much gold that he was concerned about how to store it, as the following excerpt from a tape-recorded conversation illustrates:

Don Jacobs: What I’m trying to do is figure out two things, where do I stash it, and how do I get it out of the country.

Don Jacobs: I would like for you [Dori Dutton] to set up an off shore bank, and we know where to put it if I get it out of the country, my problem is $3,000 a crack. You know, move gold out ...

Dori Dutton: You’re getting it virtually free though.

Don Jacobs: That’s why I have a problem moving it. And I’m not going to smuggle it. I don’t want to get caught. I don’t want to be jailed.

By November of 1987, Jacobs had been told by one customer that he had been visited by the FBI and that a local prosecutor had warned him that the drafts were a “fraudulent ... scam-” Jacobs also saw a television news story that focused on the certified drafts and alleged that Jacobs had sold Frank Patton a fraudulent draft. In re *87 sponse to these events, Jacobs admitted to Frank Patton that the drafts were worthless. Yet he continued to process draft requests from his downline sellers. These actions resulted in Jacobs’ indictment on June 11,1993 and his conviction after a five week jury trial.

II. Attorney-Client Privilege

The attorney-client privilege is “the oldest of the privileges for confidential communications known to the common law.” Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584 (1981). The purpose of the attorney-client privilege is to foster open communication between attorneys and their clients, so that fully informed legal advice may be obtained. However, because invocation of the attorney-client privilege will necessarily exclude relevant evidence from consideration, its application must be limited in some circumstances. One such circumstance involves a waiver by the client; a second involves use of the communication in furtherance of a crime or fraud. The district court found that the crime-fraud exception applied to the two letters from Attorney Swob and therefore admitted the letters as evidence. The district court then declined to reach the issue of waiver.

A. Crime-Fraud Exception

The crime-fraud exception removes the privilege from those attorney-client communications that are “relate[d] to client communications in furtherance of contemplated or ongoing criminal or fraudulent conduct.” In re John Doe, Inc., 13 F.3d 633, 636 (2d Cir.1994) (quoting In re Grand Jury Subpoena Duces Tecum Dated September 15, 1983, 731 F.2d 1032, 1038 (2d Cir.1984)). “It is the purpose of the crime-fraud exception to the attorney-client privilege to assure that the ‘seal of secrecy’ between lawyer and client does not extend to communications ‘made for the purpose of getting advice for the commission of a fraud’ or crime.” United States v. Zolin, 491 U.S. 554, 563, 109 S.Ct. 2619, 2626, 105 L.Ed.2d 469 (1989) (citations omitted).

A party wishing to invoke the crime-fraud exception must demonstrate that there is a factual basis for a showing of probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud or crime. This is a two-step process. First, the proposed factual basis must strike “a prudent person” as constituting “a reasonable basis to suspect the perpetration or attempted perpetration of a crime or fraud, and that the communications were in furtherance thereof.” In re John Doe, 13 F.3d at 637 (quoting In re Grand Jury, 731 F.2d at 1039). Once there is a showing of a factual basis, the decision whether to engage in an in camera review of the evidence lies in the discretion of the district court. Zolin, 491 U.S. at 572, 109 S.Ct. at 2630-31. Second, if and when there has been an in camera review, the district court exercises its discretion again to determine whether the facts are such that the exception applies. These factual determinations are governed by the clearly erroneous standard.

The district court here admitted as evidence two letters written by Attorney Swob to Jacobs. 1 Jacobs argues vociferously against the application of the crime-fraud exception to these letters. The letters were seized pursuant to a search warrant for Jacobs’ residence. Since the letters were from Jacobs’ attorney, the government appropriately turned the letters over to the district court. The government requested that the district court review the letters in camera and determine whether they were privileged, and if so, whether the crime-fraud exception applied.

The government was required to present a sufficient factual basis for a showing of probable cause to believe that a fraud had been committed by Jacobs and that the communications from his attorney were in furtherance of the fraud. The government did this to the district court’s satisfaction by submitting tape recordings of statements made by Jacobs to an undercover FBI agent. At the *88 government’s request, the district court found that:

The government has provided a sufficient factual basis. Defendant told [an undercover FBI agent] that his attorney started “lookin’ into this” and gave his opinion that “if, they would honor those drafts in an acceptable manner, there was absolutely nothing about the program that was illegal.” Defendant stated that his attorney spent time with certain individuals apparently in connection with matters charged in the indictment and actually attended one of the seminars. Defendant also said that his attorney told him “they were kiting the drafts that ah, he didn’t know how long it would be.” These statements by defendant do support a good faith belief by a reasonable person that in camera review of the letters from the attorney to defendant may reveal evidence to establish the claim that the crime-fraud exception applies.

Memo. Or., May 30, 1995, at 5. While providing only the minimum showing required before an in camera review is authorized, this decision was not clearly erroneous. The district court also found that it had alternative grounds for conducting an in camera review. 2

After review of the letters allegedly protected by the attorney-client privilege, the district court found in addition that

a prudent person would have a reasonable basis to suspect the perpetration of a crime or fraud and that defendant’s communications to his attorney were in furtherance thereof. Since “[a]dviee sought in furtherance of a future or ongoing fraud is unprivileged,” the two letters and attached papers for which defendant claims the attorney-client privilege are unprotected from disclosure under the crime fraud exception.

Memo. Or., May 30, 1995, at 9 (quoting In re Grand Jury Subpoena, 731 F.2d at 1041). Unfortunately, the critical element necessary for application of the exception is somewhat obscure in the district court’s cursory conclusion. For the crime-fraud exception has a narrow and precise application:

It applies only when the communications between the client and his lawyer further a crime, fraud or other misconduct. It does not suffice that the communications may be related to a crime. To subject the attorney-client communications to disclosure, they must actually have been made with an intent to further an unlawful act.

United States v. White, 887 F.2d 267, 271 (D.C.Cir.1989) (emphasis added). A wrongdoer’s failure to heed the advice of his or her lawyer does not remove the privilege. The attorney-client privilege is strongest where a client seeks counsel’s advice to determine the legality of conduct before taking action. With strong emphasis on intent, the crime-fraud exception applies “only when there is probable cause to believe that the communications with counsel were intended in some way to facilitate or to conceal the criminal activity.” In re Grand Jury Subpoenas Duces Tecum, 798 F.2d 32, 34 (2d Cir.1986). It is therefore relevant to show that the wrong-doer had set upon a criminal course before consulting counsel. The district court carefully addressed the issue of intent when it reexamined the applicability of the crime-fraud exception in connection with a motion for reconsideration.

Before Attorney Swob wrote the May 28, 1987 letter to Jacobs, Jacobs had already agreed to host a seminar in Cincinnati and obtained a false driver’s license, social security card and juristic identification in Mexico. These facts, the district court held, indicated that Jacobs had formed an intent to become involved in the debt elimination program before he received his attorney’s advice. More inculpatory still, the evidence presented indicated that Jacobs had been picked to be a leader in the scheme and knew about the commission structure. Since the 15% purchase price was being split three ways — 5% to Jacobs and helpers, 5% to Happy Dutton *89 and 5% to Paul Robinson — a reasonable person would recognize that nothing remained to back the “certified drafts.” A reasonable person would also have noticed, and questioned the fact, that the address for the juristic identities and each of the several banks “backing” the certified drafts was the same post office box in Mexico. Jacobs had this information before he sought Attorney Swob’s advice. Thus there was evidence that Jacobs had set upon an illegal course before seeking advice about the scheme’s legality; then, in the words of the district court: “What then were those communications?” Memo. Or., June 27,1995, at 5.

Lending more weight to the reasonable belief that Jacobs intended to utilize the communications from Attorney Swob to further his fraudulent scheme is the fact that he did so. On several occasions Jacobs used the communications to lend credibility to the scheme, by telling prospective customers that his attorney declared the program legal. Thus, it is reasonable to believe (although there was some evidence to the contrary) that Jacobs’ intent in securing Attorney Swob’s opinion was to further his Debt Elimination Plan fraud. Accordingly, the attorney-client privilege cannot protect those communications, and the admission of the letters was not an abuse of the district court’s discretion.

B. Waiver

The district court declined to reach the issue of waiver of the attorney-client privilege. Since the issue of waiver is in the first instance for the district court’s discretion, we reach the matter here only because the parties have extensively argued the governing principles and they stand in need of clarification.

Essentially, it seems to be the ease here that Jacobs publicly disclosed a “summary” of the two letters from his lawyer— but a summary that inverted the analysis and conclusion. Attorney Swob’s letters actually told Jacobs that the scheme was of dubious legality and that he should steer clear of it. The bulk of the letters was a more detailed explication of this general theme. Jacobs, on the other hand, reported that his attorney had approved of his participation. Jacobs accomplished this deception essentially by quoting a sentence of one of the letters out of context. The problem here is that this was a disclosure that we must treat as extrajudicial and therefore one which, under the case law, may not generally be used as a basis for invoking the “fairness doctrine.” 3 See In re von Bulow, 828 F.2d 94, 102 (2d Cir.1987).

In re von Bulow was a civil suit against von Bulow following his acquittal in a criminal trial, State v. von Bulow, 475 A.2d 995 (R.I.1984). After the criminal trial, the defendant “knew of, consented to, and actually encouraged attorney Dershowitz’s plans to write a book providing an ‘insider look’ into his case.” In re von Bulow, 828 F.2d at 100. Thus, even though the actual disclosures were made by attorney Dershowitz in the book, von Bulow impliedly waived his privilege by consenting to them. Id. at 101. The district court held that it would be unfair to allow von Bulow to use privileged information as a sword in public, and then invoke the privilege as a shield in the courtroom. Id. One of the issues presented to the district court was whether, when portions of certain conversations had been disclosed in the book, the entire conversations could be obtained in discovery. Id. The district court reasoned that the “fairness doctrine,” which aims to prevent prejudice to a party and distortion of the judicial process by a privilege holder’s selective disclosure of privileged information, required that the conversations in question be discoverable. Id.; see also McCormick on Evidence § 93, at 194-95 (2d ed.1972). On appeal, this court held that this application of the fairness doctrine was too broad, since the doctrine generally applies only to those privileged communications that are disclosed in a judicial proceeding. Thus, the extrajudicial disclosure of a portion of an attorney-client conversation (as in the book) cannot in itself *90 waive the privilege as to the rest of the conversation. In re von Bulow, 828 F.2d at 102. The von Bulow court, however, did recognize that the attorney-client privilege had been waived with respect to any “matters actually disclosed in the book,” even though the disclosures were extrajudicial. Id. The question, in the case before us, is whether Jacobs “actually disclosed” the content of Attorney Swob’s letters when he misrepresented to third parties that Swob had approved the legality of the DEP. The facts before us may be distinguished from the conversations sought to be discovered in In re von Bulow. Here, the essence of the situation seems to be that Jacobs, in conveying his attorney’s advice to third parties, omitted a “not” from the information conveyed, thereby altering by 180 degrees the gist of the attorney’s advice. The two letters seem to be essentially elaborations of reasons why the activities in question might very well not have been legal. In In re von Bulow, on the other hand, there is no indication that the remainder of the conversations sought to be discovered was merely an elaboration of the material disclosed.

An inaccurate statement of a privileged communication waives the privilege with respect to that communication. United States v. Mendelsohn, 896 F.2d 1183,1188-89 (9th Cir.1990). Mendelsohn was selling an illegal bookmaking computer program through the U.S. mails, and in the course of a sale told a potential customer (actually an undercover federal agent) that his attorney had said that selling the program was legal. Id. Mendelsohn then argued that “there was no waiver because he did not truthfully disclose the advice his attorney gave him and he did not disclose a significant portion of attorney-client communication.” Id. at 1188. The Ninth Circuit found, and we agree, that the privilege is waived even if the defendant misstated what his attorney told him. Id. Of course, in such a case the waiver extends only to the specific communication involved and not generally to other communications on the same subject. For Jacobs, this seems to mean that the waiver of his attorney-client privilege extends to the two letters written by Attorney Swob, the gist of which Jacobs purported to convey while selling the DEP. Whether this conclusion involves an application of the “fairness doctrine” is questionable. 4 Strictly speaking the letters do not seem to be admissible to avoid a distortion of the judicial process. Instead, they may be admitted because their gist has been disclosed and they add literal meaning to that disclosure and correct the error in Jacobs’ rendition. 5 Here the substance of the two letters was disclosed (albeit incorrectly). There thus appears to have been a waiver as to the two letters, and they may be introduced to indicate their true import. 6

*91 Public, even extrajudicial, disclosures constitute a waiver of the privilege “for the communications or portions of communications disclosed.” In re Kidder Peabody Sec. Litig., 168 F.R.D. 459, 469 (S.D.N.Y.1996) (emphasis supplied). In Kidder Peabody, a report was publicly released which paraphrased specific statements made in the course of arguably privileged communications. Id. at 470. The court held that the privilege was waived as to the specific statements, since “[disclosure of the substance of a privileged communication is as effective a waiver as a direct quotation since it reveals the ‘substance’ of the statement.” Id. In the instant case, Jacobs (incorrectly) disclosed the substance of the two letters. His waiver, which served to waive the substance of the letters, was as effective a waiver as a direct quotation (or a copy of the letters).

III. Risk of Loss

One element required for a conviction of bank fraud is actual loss or exposure to “risk of loss.” United States v. Ragosta, 970 F.2d 1085, 1089 (2d Cir.1992) (citing United States v. Stavroulakis, 952 F.2d 686, 694 (2d Cir.1992)). Jacobs argues that the district court misapplied the requirements of the “risk of loss” element. First, he contends that because the certified drafts were submitted in payment of pre-existing debts, the only risk of loss suffered by the bank occurred when the debts were created. Presentment of the drafts, Jacobs argues, in no way affected the bank’s risk of loss because the debtor remained liable for the underlying debt. Essentially, the contention is that, with the presentment of a certified draft, the bank was no worse off than if the drafts had not been presented at all. Jacobs also contends that, for those counts for which the government presented evidence of actual loss, he should have been allowed to present his theory of defense to the jury. That theory holds that any loss suffered by the bank originated with the creation of the debt, not with the presentment of the certified drafts. Second, *92 he argues that the district court incorrectly measured loss for sentencing purposes by taking the face value of the drafts as the potential or intended loss instead of calculating that the amount paid for the purchase of the worthless drafts was the actual loss (approximately 15% of face value).

A. Actual vs. Potential Loss Under the Statute

The bank fraud statute 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.

18 U.S.C. § 1344. Jacobs argued in the district court, and reasserts here, that the presentment of the fraudulent certified drafts did not create any enhanced risk of loss to the banks. The underlying debts were not discharged upon receipt of the certified drafts, but would have been discharged only if and when the drafts were paid. Since the drafts were never paid, no debts were ever discharged. Additional costs, such as interest or expenses incurred in attempting to collect the drafts were chargeable to the debtor. Thus, Jacobs argues that the element of intent to defraud a financial institution was never proved, and could not have been proved, by the government. The district court disagreed, stating that

actual loss need not be proven. The scheme to defraud clause of the bank fraud statute requires only that defendant expose the bank to a risk of loss .... even proof of an extremely remote risk will suffice,....

Defendant argues that the submission of the drafts did not put the banks at risk. Rather, the risk arose directly from the terms of the original agreement with the customer, ... Risk of loss, defendant contends, was present from the time a bank extended a line of credit and was in no way increased by submission of a worthless draft, ...

This Court disagrees. Submission of a worthless certified draft to a financial institution creates a risk of loss different in kind and different in degree from the risk of loss present at the time the institution extended the line of credit. Submitting a worthless certified draft creates a risk that the bank will honor the draft, return its evidence of the existence of the debt, and discharge the debt. This risk does not inhere in the creation of a line of credit. Submitting the worthless draft also creates the risk that the bank will release its security for invaluable consideration, another risk that does not inhere in the creation of a line of credit. Because of these additional risks of loss, different in kind and degree, the evidence concerning loss that defendant seeks to elicit is of no consequence and will be excluded as irrelevant. 7

In order for the bank fraud statute to apply, the fraud must be against the bank. For example, a scheme to pass bad cheeks is *93 not bank fraud. United States v. Orr, 932 F.2d 330 (4th Cir.1991). Here, Jacobs argues that he cannot be convicted of bank fraud because he never intended that the banks would incur any loss. Instead it was the debtors who were the victims of the fraud. This ignores the fact that the conspirators instructed the debtors to present the certified drafts to the creditor banks in discharge of their debts.

The bank fraud statute was enacted to “ ‘proteet[ ] the financial integrity of [federally guaranteed financial] institutions, and ... assure a basis for Federal prosecution of those who victimize these banks through fraudulent schemes.’” Stavroulakis, 952 F.2d at 694 (quoting S.Rep. No. 225, 98th Cong., 2d Sess. 377 (1983), reprinted in, 1984 U.S.C.C.A.N. 3182, 3517). The statute was modeled on the mail and wire fraud statutes, and Congress indicated that it wanted the bank fraud statute to be interpreted as broadly as those statutes. Id. Consequently, “a conviction under the ‘scheme to defraud’ clause of the bank fraud statute requires ... a pattern or course of conduct designed to deceive a federally chartered or insured financial institution into releasing property, with the intent to victimize the institution by exposing it to actual or potential loss.” Id.

In United States v. Blackmon, 839 F.2d 900, 904 (2d Cir.1988), this court held that where the fraud (a “pigeon drop” scheme 8 ) is aimed not at the bank, but at an individual, the offense is not bank fraud. In Blackmon, the victim was induced to voluntarily withdraw all of her money from a bank and turn it over to certain confidence men. This, we held, was not conduct covered by the bank fraud statute. Id. On the other hand, a scheme can be primarily directed at a third party and still give rise to bank fraud. In Morgenstem, the defendant engaged in a scheme to embezzle money from his employer by representing to the employer that it owed more in payroll taxes than was actually the case. The employer wrote and signed cheeks payable to Chemical Bank which the defendant deposited into an account over which he had control. United States v. Morgenstern, 933 F.2d 1108, 1112-13 (2d Cir.1991). We held that Morgenstern had committed bank fraud, because, in order to effectuate his scheme, the defendant was required to misrepresent to the bank that he had the authority to deposit these cheeks into an account over which he had control. Further, he engaged in a scheme designed to misrepresent his status to the bank, by mixing legitimate business with his fraudulently obtained checks. In this way, he misrepresented himself to the bank in order to fraudulently obtain control over money which was not his to control. Id. at 1113.

The problem now before us is that, had the certified drafts never been created, sold and presented, the risk of loss would have turned on the debtor’s ability to pay. After presentation of the fraudulent drafts, the bank’s risk would ultimately have similarly turned on the debtor’s ability to pay. There is, therefore, a real question whether the bank’s risk has been increased.

But, for purposes of this statute, the risk can be said to have been increased in that there was some possibility — at least a potential — that the bank would release security, delay efforts at collection or otherwise act in reliance upon its receipt of the certified drafts. Admittedly, the possibility of such actions in reliance may be rather remote since banks are cautious; but such actions are not impossible and, under the case law, a mere possibility of detrimental reliance is enough. In other words, the bank has been put in harm’s way and, for purposes of construing the statute, we must assume a highly incautious bank. Another way of analyzing the problem is to think of the bank’s acquisition of the certified draft as decreasing its risk (admittedly in the illusory belief that the draft might be good). Subsequently, this decreased risk was again heightened when the certified draft proved to be worthless. Thus, there was an increase in risk though *94 only back to the level that existed before the draft was presented.

The case law indicates that an “intent to victimize the institution by exposing it to actual or potential loss” is required. Stav-roulakis, 952 F.2d at 694. Here Jacobs apparently had little realistic prospect of actually causing loss to the bank. But this is not required. What is required is an intent to place the bank at risk of diminishing or delaying its ability to collect the debt. In this case, there was also an intent to create expectations in the bank, which were later dashed.

Stavroulakis presents a fact situation somewhat analogous to the one before us. In Stavroulakis the defendant engaged in a scheme of selling stolen blank checks, for which he was convicted of bank fraud. Even though he argued that he only intended to sell the checks, and had no fraudulent intentions with respect to the bank, we found that “[i]nherent in a sale of stolen checks is that they will eventually be presented to the drawee bank for payment; and payment over a forged signature exposes a bank to real loss.” Stavroulakis, 952 F.2d at 695. Similarly, Jacobs may have intended to defraud his customers by inducing them to purchase certified drafts which he knew were not “worth the paper they’re printed on,” but inherent in that transaction was the risk that the certified drafts would eventually be presented to the creditor as payment, and acceptance of a false certified draft would expose the creditor bank to real loss. The risk of release of collateral or other action in reliance by the banks here is perhaps less than that of a forged signature in Stavroulakis, but for purposes of construing the statute, a potential is all that is required.

The bank fraud statute covers Jacobs’ conduct because his DEP scheme exposed the banks to a risk of loss through the invalid certified drafts.

B. For Sentencing Purposes

Jacobs also objects to the use of the face value of the certified drafts in assessing intended loss under the Sentencing Guidelines § 2F1.1. 9 This issue is related to the risk of loss question discussed above, but presents somewhat different considerations. In addressing the sentencing problem, one must remain aware of what were the actual and intended objects of the fraud. The obvious, direct (and “actual”) victims were, and were intended to be, the debtors who bought the worthless drafts at about 15% of their face value. The losses suffered by these victims accrued directly to the pecuniary benefit of the conspirators. The subsequent phase of the fraud consisted of the debtors presenting the drafts to their banks in payment of their loans (in accordance with the instructions of the conspirators). As we have indicated in our discussion of statutory risk of loss, the underlying debts would not generally have been discharged upon receipt by the banks of the certified drafts but would have been discharged only if and when the drafts were paid. Since the drafts were never paid, no debts were ever discharged. If the debts had been discharged, any loss to the banks would have accrued to the pecuniary benefit of the debtors, not to the benefit of the conspirators. The task before us is to fit these and other facts into the provisions of the Guidelines measuring “loss.”

Jacobs argues that he consistently maintained his innocence and asserted his belief that the drafts would be honored. Therefore, he argues, he never intended any loss to the banks. This argument was rejected by the jury when it convicted him, and there is sufficient evidence to support this conclusion. The question then turns on whether the loss should be based on the actual loss suffered by Jacobs’ customers (the individuals who purchased the drafts and attempted to use them in payment for their debts) or based on a possible and “intended” loss to the banks (as represented by the face value of the drafts). Jacobs further argues that the in *95 dictment did not charge him with seeking a “face value” loss to the banks, and that for sentencing purposes the loss must be limited to the value of lost interest (by the banks) and the