WASHINGTON, April 1 (Reuters) - The U.S. Supreme Court on Tuesday appeared poised to limit the scope of a federal criminal law that targets people who defraud banks.
A ruling along those lines could prevent federal prosecutors from using the law to crack down on routine fraud, such as the use of altered checks to purchase merchandise.
In the future, prosecutors might have to show the defendant intended to defraud a bank in order to win a conviction using the law. Cases of fraud that do not include intent to defraud could still be prosecuted under state laws or potentially via another federal law that imposes shorter sentences.
The case will not affect the ability of prosecutors to use the law to go after direct schemes to defraud financial institutions.
The nine justices heard a one-hour oral argument on Tuesday in an appeal brought by Kevin Loughrin, who was convicted in Salt Lake City, Utah, of six counts of bank fraud for stealing checks he then altered so he could purchase merchandise at Target Corp stores.
Loughrin told police he intended to buy items using the checks, then return them for cash refunds. He was charged with using altered checks totaling $1,184.
During the argument a majority of the justices appeared to agree with Loughrin's lawyer that the federal government's interpretation of the law was too broad but it was unclear exactly what limits the court would set. The court's conservative members, in particular, are often concerned about expansive federal power at the expense of states.
"This is a sweeping interpretation you're offering us," Justice Anthony Kennedy told Anthony Yang, assistant to the U.S. Solicitor General.
Under the government's approach, federal prosecutors could pursue cases involving "every fraudulent transaction in the economy, whenever a check is involved," Kennedy added.
Between 2006 and 2010 the government sought to prosecute nearly 3,000 cases using the statute, according to court papers.
In Loughrin's case, the Denver-based 10th U.S. Circuit Court of Appeals upheld his conviction in a March 2013 ruling. Loughrin did not appeal his related convictions for identity theft and possession of stolen mail.
A decision is expected by the end of June. The case is Loughrin v. United States, U.S. Supreme Court, 13-316. (Reporting by Lawrence Hurley; Editing by Howard Goller and Jeffrey Benkoe)