DOJ Omits Crucial Element in Southern Poverty Law Center Charges

The Justice Department relied on a lesser-known bank deception statute to indict the Southern Poverty Law Center while omitting an element needed to prove the crime: intent to influence a financial institution.

The infirmities suggest federal prosecutors in the Middle District of Alabama who brought the case may have improperly instructed grand jurors, which could lead a judge to dismiss the case or demand transcripts of the typically-secretive proceedings in which DOJ obtained the indictment, said several defense lawyers and former white-collar prosecutors.

The federal grand jury in Alabama returned an 11-count indictment April 21 of SPLC that included allegations the nonprofit made false statements to federally insured banks by opening accounts under fictitious organization names to disguise payments to informants infiltrating extremist groups. Rather than using the standard bank fraud statute, federal prosecutors turned to a federal banking statute—on four of the counts—that prohibits knowingly making false statements to influence a bank action on an application, advance, or other agreement.

Although the indictment states that SPLC “knowingly” made false statements in bank applications, there’s no specific mention of what action by the bank the statements sought to influence. Including such intent should’ve been “prosecution 101,” said Scott Armstrong, a former supervisor in DOJ’s criminal fraud section.

“To have a complete absence of the required intent—in four counts—is a major, major omission that I think will be troubling to the court and really open the door to whether in fact the grand jury was instructed properly,” said Armstrong, the founding partner of defense firm Armstrong & Bradylyons PLLC.

The separate wire fraud and money laundering charges have garnered more criticism among SPLC supporters who say DOJ lacks evidence and is blatantly targeting the progressive group as part of President Donald Trump’s partisan weaponization of law enforcement. That’s prompted some lawyers to predict the false statement counts—weaknesses and all—could be more likely to survive in a trial, especially if prosecutors corrected flaws by updating the charges.

“They’re going to have an evidentiary challenge with regard to the wire fraud counts, but the bank fraud counts are problematic as a matter of law. The element of the object of the scheme is not pleaded,” said Joseph Rillotta, partner at Meadows Collier and former DOJ tax lawyer. “That’s a failure to state an offense.”

The Justice Department defended the case’s merits, citing additional evidence that it says hasn’t yet been presented to a grand jury.

“These issues will all be litigated in court and the government remains confident in its case,” said a DOJ spokesperson in a statement. “It’s a shame that” the lawyers criticizing the indictment “aren’t aghast at these allegations of severe fraud, manufactured racism, and abuse of donor dollars.”

Addy Schmitt, co-founder of the Washington boutique Kropf Moseley Schmitt that’s representing SPLC, declined to comment.

‘False or Misleading’

DOJ is also charging the group with six counts of wire fraud and one count of conspiracy to commit money laundering related to $3 million in payments to informants the group allegedly placed within the Ku Klux Klan, Aryan Nations, and other extremist groups.

The federal banking statute DOJ relies on is used sparingly by prosecutors compared to the predominant bank fraud statutory framework to secure money, property, or other assets from a financial institution.

It’s telling that DOJ didn’t cite the more common statute, which requires showing a coordinated effort to defraud an institution, said Tracy Anagnost Martinez, former attorney in DOJ’s Tax Division and the IRS’ Office of Chief Counsel.

“They know that there was no intent to defraud the financial institution in any way, and they’re trying to kind of squeeze this in through a loophole,” by relying on the lesser-used statute, said Anagnost Martinez, now a senior director at the California-based Omega Accounting Solutions.

A 2025 Supreme Court ruling on the statute used by DOJ here also forces the federal government to meet a higher bar in proving false statements to a bank. The high court ruled in Thompson v. US that the statute doesn’t prohibit statements that are misleading but not false.

DOJ’s indictment, however, uses the terms interchangeably, outlining examples of alleged “false or misleading information” on the ownership and control of the entities for which the bank accounts were opened.

“The fact that it says ‘misleading’ is a problem” for SPLC prosecutors because it makes those charges “susceptible to a motion to dismiss,” said William Johnston, a former DOJ criminal fraud supervisor who’s now a partner at Bird Marella.

White collar defense lawyer Lisa Mathewson went a step further: “Charging that the statements were ‘misleading’ all but admits that DOJ can’t prove they were false—whether or not the prosecutors missed the Supreme Court’s 2025 opinion on that very topic.”

Nevertheless, the bank deception law may still prove to be prosecutors’ best vehicle for Acting Attorney General Todd Blanche to eventually reach a jury trial and potential conviction. But well before then, some legal observers are interested to see if the judge takes the rare step of demanding disclosure into the grand jury proceeding.

And similar to the omission of intent, the inclusion of “misleading” may wind up up convincing the court to order the transcript.

“The use of that language, understanding recent case law on that front, triggers an inquiry as to what the grand jury was instructed,” said Gregory P. Rosen, shareholder at Rogers Joseph O’Donnell PC and a former federal prosecutor.