Update: On November 21, 2019, the Supreme Court of Ohio handed down a merit decision in this case. Read the analysis here.

“Your friends on the other side say the checks were drawn from particular accounts, and those account holders would be the actual victims and not the bank. How do you respond to that?”

Justice French, to the assistant prosecutor

“Wouldn’t most people consider the person who has to pay the forged check the victim?”

Justice DeWine to the assistant public defender

On May 8, 2019, the Supreme Court of Ohio heard oral argument in State of Ohio v. Zachary C. Allen, 2018-0705. At issue in the case is whether a defendant convicted of forgery may be ordered to repay the bank that cashed the forged checks. Justice Donnelly was absent from oral argument, but Chief Justice O’Connor announced that he would fully participate in the Court’s decision.

Case Background

In July 2016, Zachary Allen went to several banks in the Columbus area and cashed forged checks made payable to himself. On August 14, 2016, the Franklin County Grand Jury indicted Allen with seven counts of forgery and seven counts of possession of criminal tools. Allen pleaded guilty to the forgery charges and the rest of the charges were dismissed.

At his sentencing in March 2017, Allen objected to the State’s request that the court order Allen to pay restitution to the banks that cashed the checks, on the basis that the banks were third parties, not “victims” within the meaning of Ohio’s restitution statute, R.C. 2929.18. The trial court held that the banks were victims of Allen’s forgery and ordered Allen to pay restitution to the banks for the amounts paid on the forged checks. Allen appealed to the Tenth District Court of Appeals, challenging only the restitution order.

The Appeal

In a unanimous opinion, the Tenth District Court of Appeals reversed the trial court’s restitution order, holding that the banks were not victims of the underlying offenses. The appeals court found that because the banks reimbursed the account holders, the account holders—not the banks—were the victims who suffered direct economic harm.

R.C. 2929.18, does not define “victim,” but the appeals court relied on other Ohio appellate decisions that held that banks that reimburse their customer account holders are third parties, and cannot be awarded restitution from a defendant. Although the banks cashed the forged checks, the account holders suffered the initial economic loss and are therefore the victims in this case. Thus, the court held that the banks could not be awarded restitution.

The State filed a discretionary appeal.

Read the oral argument preview here.

State’s Proposition of Law Accepted for Review

A bank which cashes a forged check, suffers an economic loss, and is a “victim,” under R.C. 2929.18. When a defendant is convicted of forgery, he may be ordered to pay restitution to a bank which cashed the forged check defendant presented.

Key Statutes and Precedent

R.C. 2929.18 (Restitution Statute)(“Financial sanctions that may be imposed pursuant to this section include, but are not limited to . . . restitution by the offender to the victim of the offender’s crime or any survivor of the victim, in an amount based on the victim’s economic loss.”)

R.C. 2913.31 (“(A) No person, with purpose to defraud, or knowing that the person is facilitating a fraud, shall do any of the following: . . . (1) Forge any writing of another without the other person’s authority; (2) Forge any writing so that it purports to be genuine when it actually is spurious, or to be the act of another who did not authorize that act, or to have been executed at a time or place or with terms different from what in fact was the case, or to be a copy of an original when no such original existed[.]”)

R.C. 2930.01(H) (Rights of Victims of Crimes)(Definitions)

(“‘Victim’ means . . . [a] person who is identified as the victim of a crime or specified delinquent act in a police report or in a complaint, indictment, or information that charges the commission of a crime and that provides the basis for the criminal prosecution . . . .”)

Ohio Const. Art. I Section 10a (Marsy’s Law) (To secure for victims justice and due process throughout the criminal and juvenile justice systems, a victim shall have the following rights, which shall be protected in a manner no less vigorous than the rights afforded to the accused: * * * (7) to full and timely restitution from the person who committed the criminal offense or delinquent act against the victim . . . .”)

(D) As used in this section, “victim” means a person against whom the criminal offense or delinquent act is committed or who is directly and proximately harmed by the commission of the offense or act.

State v. Pietrangelo, 2005-Ohio-1686 (11th Dist.) (the government was not a “victim” eligible for restitution when the government advanced its own funds to pursue a drug buy through an informant. The government was not “the person or entity that was the ‘object’ of the crime.”)

 State v. Hinson, 2006-Ohio-3831 (8th Dist.) (an insurance company was also a victim eligible for restitution when the company voluntarily paid a third party for damages caused by the offender.)

 State v. Bartholomew, 2008-Ohio-4080 (“[T]he purpose of R.C. 2929.18(A)(1) is to require the offender to reimburse the victim — or whatever entity paid the victim — for the economic loss caused by the crime.”)

 State v. Kiser, 2011-Ohio-5551 (2nd Dist.) (bank was not a “victim” of a forgery; “the victims of the thefts are the people named in the indictment whose money Kiser stole.”)

 State v. Estes, 2011-Ohio-5740 (3rd Dist.) (banks were victims within the meaning of R.C. 2929.18 in fraudulent credit-card transactions where the banks, not the account holder, paid each transaction.)

 State v. Dull, 2013-Ohio-1395 (3rd Dist.) (“The General Assembly removed the third-party language from [R.C. 2929.18] for a reason in 2004, and it has never put the language back.”)

 State v. Stump, 2014-Ohio-1487 (4th Dist.) (“[T]he victim is the individual from whose account [the defendant] transferred money into her account. [The Bank] is a third-party that reimbursed its customer the money stolen from his account.”)

 State v. Harris, 2015-Ohio-4412 (6th Dist.) (“Furthermore, a bank which reimburses a customer/victim is not a “victim” of the crime and, therefore, the trial court cannot require restitution to be paid to the bank.”)

 In re M.A., 2016-Ohio-1161 (11th Dist.) (a victim is the object of crime; upholding restitution to school district, but not to the police and fire departments, for expenses incurred in responding to bomb threat.)

 Shaw v. United States, 137 S.Ct. 462 (2016)(under the federal bank fraud statute, a bank retains a property interest in customers’ deposits.)

At Oral Argument

Arguing Counsel

Barbara A. Farnbacher, Assistant Prosecuting Attorney, Franklin County, for Appellant State of Ohio

Robert D. Essex, Assistant Franklin County Public Defender, for Appellee Zachary Allen

State’s Argument

When a bank cashes a forged check, the bank is entitled to restitution for its economic losses from the offender for three reasons. First, the bank is a victim of the forgery offense because it is the object of the offense and suffers an economic loss from it. The banks which cashed the forged checks gave the offender money that was not his. Second, the banks are harmed by the wrongful conduct because they have a possessory interest in their customers’ deposits and a right to use their customers’ deposits to make money. The money they have paid out on account of the forged checks is no longer available for them to use. And they are harmed because they are required to repay their customer accounts for any checks paid that are not properly payable under R.C. 1304.30. Third, despite what many lower courts in Ohio have held, third parties are not precluded from receiving restitution under R.C. R2929.18.

In June 2004 the legislature amended the restitution statute, and repealed language that both required restitution to third parties and prohibited restitution to insurers. Deleting this language should be read to permit, not prohibit, restitution to third parties who suffer an economic loss as a direct and proximate result of the offense. There is no mandatory prohibition against third party restitution in that statute.

There can be more than one victim of an offense, and in a forgery a bank which cashes a forged check can be a victim in addition to the account holder. In this situation, the bank is as much a victim as the account holder. The definition of “victim” in R.C. 2929.18 shouldn’t be read as narrowly as the defendant advocates, limited only to persons named in an indictment. The definition of victim in R.C. 2930.01(H)(1) is not so limited, and includes individuals identified in police reports, complaints and indictments. Reading the word “victim” so narrowly is contrary to R.C. 2929.11, the purposes of felony sentencing, which requires a trial court to consider the need for restitution to the victim or the public or both. It is also contrary to one of the purposes of restitution, which is to rehabilitate the offender by making him or her responsible for repairing the harm caused to the victim by the offense. So this Court should interpret “victim” in R.C. 2929.18 broadly and not narrowly to exclude banks in forgery cases. Black’s Law Dictionary has an appropriate definition of victim- it is a person who is harmed by a crime.

Finally, this Court need not decide the third party issue because the banks were direct victims here. They suffered economic losses, they were harmed by the offenses, they were required to reimburse their customers’ accounts and they lost their possessory interests in the money that was fraudulently obtained. Banks have property interests in their customers’ deposits. Certainly those who suffer economic losses from the commission of a crime should be permitted to seek restitution from the offender under R.C. 2929.18. Therefore, because the banks which cashed the forged checks suffered losses and were harmed, they were victims and were entitled to restitution and the court of appeals should be reversed.

Allen’s Argument

The banks are not victims here because they are not the objects of the offense, nor were they named in the indictment. The banks may have the right to go after the offender, but there is a wealth of case law that states that a bank that reimburses a customer is not the object of the offense. The state’s argument is that anyone who is out money is a victim of a crime. Ohio law simply does not support that.

There are two ways to look at “victim” in our context here. One is the definition in Marcy’s law, which the state has acknowledged does not apply here. That is probably the broader definition the state seeks. There is another definition in R.C. 2930, the Victims’ Rights statute, but the 10^th, and several other districts, have refused to adopt that definition because it is self-limiting. That statute states a victim is the person named in the police report, complaint, or indictment. Under that definition, the state loses, because the banks are not listed in the indictment. No one was listed in the indictment.

Additionally, the state bases its case on two facts not in the record. First, that the bank reimbursed the customers’ account, and second that the bank was not insured for those losses. The prosecutor simply asserted those facts without evidentiary support, and the state’s entire case is based on those assertions. If we accept that the prosecutor’s assertions are sufficient, there is no dispute that the bank is the one out the money.  But that is not the way the statute is set up. In 2004, the legislature specifically removed the language referring to third parties.

Finally, the Court need not reach the issue of whether the banks have a property interest in their customers’ deposits. Clearly it is the account holder, the customer, who has suffered the loss. The customers are the first line of loss.

What Was On Their Minds

Who Is The Victim Here?

If a bank pays a forged check, who is ultimately responsible, asked Justice DeWine? If the bank’s ultimately responsible why wouldn’t they be a victim? With an insurance company you have a contract between the insured and the insurer to reimburse, he commented, but that seems very different from someone creating a crime that is directly taking someone’s property. Did the state articulate the wrong theory? If they articulated the right theory, do they win? Why wouldn’t a bank whose money has been taken from it, who is directly responsible, as the only party responsible for paying this forged instrument, and the only one who loses anything, why wouldn’t they be the victim? Wouldn’t most people think that someone who is responsible for paying a check that’s been forged is the victim?

If the banks had been designated in the indictment along with the individual customers, would the defense argument be different, asked Chief Justice O’Connor? Because they would then be classified statutorily as victims?

So, is the defense arguing that since so nobody is listed, no one is a victim here, asked Justice Fischer?

 The Object of the Offense

Isn’t the object of the offense the money, asked Justice DeWine? The object of the offense is to get the money and ultimately the bank owes the money?

You have a negotiable instrument and somebody hands that to a bank teller with a forged signature. Who’s defrauded, asked Justice Fischer?

What makes the bank a third party, asked Chief Justice O’Connor, noting that after paying the account holder, the bank simultaneously had less money to invest.

This Particular Forgery

Is it significant that the offender went into the bank, asked Justice French? And actually presumably spoke to a teller and had the checks cashed physically at the bank, as opposed to putting them in an ATM or in some other way getting them drawn?

Why does it matter that the check was cashed in person, asked Justice Stewart? What if he did something with an app but was still able to steal the money? Is it different from the bank electronically giving money to a person who’s not entitled to have it? Was Mr. Allen convicted under R.C. 2913.31(A)(1) or (A)(2)? Because if it were (A)(1), as opposed to (A)(2), it seems that one clearly makes the bank a victim, and one is more questionable. Can we make the determination based on that?

Were the forged checks that were brought to Chase Bank written on Chase paper, asked Justice Fischer? So it’s not like this negotiable instrument went through various levels and groups, like where a particular bank ended up with the loss in a kiting situation with multiple banks. Chase was the bank the paper was written on, and in which the forger or his accomplice took the paper with the forged document. So where is the third party? Wouldn’t the depositor then be the third party?

Banks’ Property Interest in the Funds

Did the state argue the banks’ property interest in the funds below, asked Chief Justice O’Connor? Does the bank always have a property interest in the funds that are absconded, in no matter what manner? Is it the state’s position that the Court should write that any time there are funds on deposit the bank has a property interest? Later she commented again that she was interested in whether or not the state raised the argument below that there is a property interest here, adding that banks were in the business of making money, and so they can’t make money unless they’ve got the cash. (Both sides agreed this argument was not raised below).

Under law isn’t this a debtor creditor relationship, asked Justice Fischer?  You take your money to the bank, and then the bank can use that money?

Negotiable Instruments

Who pays for a negotiable instrument when it’s forged, asked Justice Fischer?  Should we care what the legislature intended when they enacted Article 3 of the UCC (Uniform Commercial Code) to help determine who has the economic loss? Isn’t that a commercial issue?

How It Looks From the Bleachers

To Professor Emerita Bettman

Like a win for the state.  This was another argument with lawyers with wildly different styles. Ms. Farnbacher gave a stolid, clear, straightforward, persuasive argument for why the bank was a victim in this case, while Mr. Essex, seemingly irrepressible, had an annoying habit of interrupting himself, and repeatedly going off on tangents, making it very difficult to follow his argument. The Chief had to remind him to answer the actual question asked.

And yet. While everyone agrees that the first line of victims were the account holders, whom the banks had to reimburse, and while that meant the banks were then out that money, and thus were obviously victims in that sense, I can’t quite agree with the state that the banks were as much the victims as the account holders. The banks aren’t blameless here—after all, they paid on a forged endorsement.  That seems to have gotten lost in the shuffle. And according to the defense, neither proof of repayment of customers’ accounts nor the lack of insurance is in the record, but were only representations by the prosecutor when the sentencing court was considering restitution.  I have no idea if that is a problem or not. I was surprised no one asked Ms. Farnbacher anything about that.

The Chief clearly wants to find, consistent with federal law, that the bank has a property interest in customers’ deposits, but both sides agreed this was not argued below.  It will be interesting to see if the Court adopts that reasoning in its decision.  Still, despite these problems, it looks like a majority, if not all the justices, led by Justices Fischer and DeWine, favor the state here, and will find that there can be more than one victim of an offense, and that the banks were victims here.

To Student Contributor Carson Miller

I think this case boils down to, as Justice Fischer put it, common sense. Allen’s counsel even admitted that his argument does not meet the common-sense standard; a bank that is defrauded and reimburses the affected accounts clearly suffered an economic loss. I think that the common-sense idea, along with Justice Fischer’s distinctions between much of Allen’s case law and the facts of this case should make this a win for the State.

However, Chief Justice O’Connor’s concern that the State did not raise its property interest argument in the lower courts could undermine the bank’s status as a victim, and may be Allen’s best chance to win.

To Student Contributor Madeline Pinto

I believe the Court will most likely rule in the State’s favor. The Court did not appear to take issue with any of the State’s main arguments as to why a forger can be required to pay restitution to a bank that cashed a forged check. The Justices essentially allowed the State to make its arguments without interruption and the State provided a persuasive and effective response to the Justices’ single question about whether the account holders, rather than the bank, should be considered the actual victims of the forgery. The Justices appeared fully satisfied by the State’s argument that both the bank and the account holders could be considered victims because there can be more than one victim to the offense.

In contrast, the Justices peppered Allen with questions that indicated they took issue with his argument that the bank was not a victim. In their questions, the Justices continually highlighted all of the numerous ways in which the bank could be considered a victim and asked Allen to explain why the Court should, nevertheless, decide that the bank was not a victim of the forgery. Allen never provided a persuasive and satisfactory response, but rather, was forced to concede several points that severely undermined his contention that the bank should not be considered a victim. For example, when the Justices asked who is defrauded when someone writes a forged check and hands it to the bank teller, Allen conceded that it is the bank that is defrauded. Additionally, when asked who is ultimately responsible for paying a forged check, Allen conceded that the bank is ultimately responsible. I believe Justice DeWine encapsulated the feeling of the Court in his comment that most people would consider a bank that has had its money taken from it, is the party directly responsible for paying the forged checks, and is the only party to suffer a financial loss to be a victim of the forgery.

Further, the Justices did not appear persuaded by Allen’s argument that the bank should not be considered a victim because it was not listed in the indictment. In particular, the critical tone of Justice Fischer’s question about whether no one should be considered a victim to the underlying forgery because technically no one was listed in the indictment indicated that he was doubtful of Allen’s reasoning on this point. Because the Justices did not seem to take issue with any of the State’s contentions and appeared unpersuaded by Allen’s argument that the bank was not a victim of the forgery, I believe the Court will most likely rule in the State’s favor.