## Facts

- Donald E. Jacobs participated in a “Debt Elimination Program” (DEP) that marketed “certified drafts” purportedly drawn on Mexican financial entities that did not exist.
- Customers seeking to eliminate debts paid about 15% of the stated debt amount to DEP distributors and received an official-looking, but worthless, draft equal to the debt’s face value.
- Customers were instructed to submit the draft to the creditor bank and demand return of collateral or evidence of indebtedness.
- Banks typically processed the drafts but did not release collateral unless the drafts cleared; the drafts never cleared.
- The scheme left customers out the fees paid and still owing the underlying debt, and it caused banks to incur collection and processing expenses.
- Jacobs sought advice from counsel about the program; counsel warned him not to participate because it appeared illegal.
- Jacobs proceeded anyway and told potential customers that his attorney had confirmed the program was legal.
- A jury in the Western District of New York convicted Jacobs of conspiracy (18 U.S.C. § 371), bank fraud (18 U.S.C. § 1344), and mail fraud (18 U.S.C. § 1341), and the court imposed concurrent 51-month sentences.

## Issues

1. Whether admitting Jacobs’s attorney letter at trial violated the attorney-client privilege.
2. Whether the evidence was insufficient for bank fraud because the scheme allegedly did not expose banks to a risk of loss under 18 U.S.C. § 1344.
3. Whether the district court improperly gave a conscious-avoidance (willful blindness) instruction.
4. Whether the district court misapplied the Sentencing Guidelines in calculating Jacobs’s sentence.

## Decision

- The Second Circuit affirmed the convictions and sentence.
- The court held that admission of the attorney letter did not require reversal, including because Jacobs’s own use of the attorney’s advice in dealings with others supported admission to rebut a misleading impression.
- The court held the evidence was sufficient to show banks were exposed to a risk of loss, including processing and collection costs generated by the fraudulent drafts.
- The court held the conscious-avoidance instruction was warranted by evidence that Jacobs suspected illegality, received a warning from counsel, and proceeded while misrepresenting the advice.
- The court held the district court’s Sentencing Guidelines calculations were proper.

## Legal Principles

- Attorney-client privilege may be waived, and otherwise protected communications may be admitted to counter a party’s affirmative use or misrepresentation of attorney advice that creates a misleading factual impression.
- For bank fraud under 18 U.S.C. § 1344, the government need not prove actual financial loss; it is sufficient to prove a scheme that exposes a financial institution to a risk of loss, including non-trivial operational or collection costs.
- A conscious-avoidance instruction is proper when the evidence permits a finding that the defendant was aware of a high probability of illegality and deliberately avoided confirming the truth, even if the jury could also find actual knowledge.
- Sentencing determinations under the Guidelines are upheld when supported by the record and consistent with the Guideline definitions and applicable enhancements, including loss/risk assessments and role adjustments.

## Conclusion

The Second Circuit affirmed Jacobs’s fraud and conspiracy convictions and concurrent 51-month sentences, concluding that the scheme exposed banks to a sufficient risk of loss, the jury could be instructed on conscious avoidance, and the use of counsel’s warning letter did not warrant reversal given Jacobs’s conduct regarding the advice and the trial record.


United States v. Jacobs, 117 F.3d 82 (2d Cir. 1997)