Opinion ID: 328021
Heading Depth: 1
Heading Rank: 3

Heading: Dismissal of the Indictment on Constitutional Grounds

Text: 32 Defendants raise numerous challenges to the application of the criminal statute to them under the facts of the case. The first contention that prosecution is barred by the ex post facto clause of the Constitution is without merit. It is settled that the ex post facto clause is applicable to a law which makes an action done before the passing of the law, and which was innocent when done, criminal; and punishes such action or one which aggravates a crime, or makes it greater than it was, when committed. Calder v. Bull, 3 Dall. (3 U.S.) 386, 390, 1 L.Ed. 648 (1798). The misapplication statute is an old statutory prohibition, enacted in its present form in 1948, see 62 Stat. 729, but having antecedents going back into the 19th Century. See Rev.Stat. 5209, p. 1007 (1873-74); United States v. Britton, 107 U.S. 655, 2 S.Ct. 512, 27 L.Ed. 520 (1883). Inasmuch as the statute and its penalty long predated the present prosecution, the indictment is not prohibited by the ex post facto clause. 33 Defendants also argue, however, that this prosecution is prohibited because it constitutes an ex post facto application of criminal sanctions and is an unlawful retroactive application of government policy. They contend that there had been no prosecutions of the present nature or specific warning that the conduct under scrutiny in this case was deemed to be criminal prior to the issuance of Banking Circular No. 31 in 1970, by the Comptroller of the Currency, and that the loan agreement in question was consummated prior to the issuance of Circular 31. Circular 31 was sent to the presidents of all national banks on October 22, 1970, at the request of the Justice Department, some ten months after the consummation of the Mann-Bank of the Southwest loan on December 12, 1969. It advised the bank presidents that although there were no cases at the present time construing the use of compensating balances to obtain a preferential rate of interest to be a misapplication of funds under the criminal statutes, some such situations might warrant prosecutive action. Additionally, defendants point to a March 21, 1973, letter from Comptroller of the Currency Camp to Assistant Attorney General Petersen in which the Comptroller stated, It does not appear either possible or fair to charge Mr. Mann or the Bank of the Southwest or the First National Bank of Waco with a willful violation. Moreover, Camp stated, (I)t appears to me that all parties endeavored to comply in good faith with all governmental requests made upon them and with the law and that it would not be equitable to ask for an indictment based on these facts. Defendants further note that regular bank examinations subsequent to the issuance of Circular 31 gave no indication that the loan in question was considered to be in violation of law. They also point to the fact that when the Deputy Comptroller of the Currency questioned the propriety of the compensating balance and suggested a reduction in the amount of the account, prompt action was taken to reduce the balance on deposit to an appropriate level. 5 Additionally, defendants refer to a letter from John C. Keeney, Chief of the Fraud Section of the Department of Justice, to United States Attorney Anthony Farris dated May 4, 1971, in which Keeney stated in part, Only in an exceptionally aggravated situation occurring before the cut-off date involving substantial loss and where the defense of common practice might be overcome, should prosecution under any theory be considered. 6 34 In Raley v. Ohio, 360 U.S. 423, 79 S.Ct. 1257, 3 L.Ed.2d 1344 (1959), the Court held that a citizen could not be convicted for exercising a privilege which the State clearly had told him was available to him or if the government conduct constitutes active misleading of a person in order to prosecute him. Id. at 438, 79 S.Ct. at 1266. The Court reiterated the policy of proscribing certain types of prosecutions in United States v. Laub, 385 U.S. 475, 87 S.Ct. 574, 17 L.Ed.2d 526 (1967), where, in affirming the dismissal of an indictment, the Court said, Ordinarily, citizens may not be punished for actions undertaken in good faith reliance upon authoritative assurance that punishment will not attach. Id. at 487, 87 S.Ct. at 581. The present case, however, differs from the situations in Raley and Laub. Only an allegedly widespread practice of entering into preferential loans of the kind involved here, together with an absence of prior prosecutions, can be said to require dismissal of the indictment under the Raley-Laub rationale. But the Government has never approved the making of loans under the circumstances here, nor has it previously vouched for the propriety of such transactions. However, governmental silence is not affirmative assurance that punishment will not attach and a mere absence of prior prosecutions does not constitute active misleading, and the decisions in Raley and Laub are thus not applicable to the circumstances in this case. As the Tenth Circuit said of the compensating balance practice in United States v. Brookshire, supra, If, as defendant(s) say, this practice is the usual way in which bankers do business, those who engage in it must suffer the penalty which the law constitutionally provides. 514 F.2d at 790. 7 35 Defendants next contend that the indictment should be dismissed because they were unfairly singled out for prosecution. They assert that the compensating balance practice is widespread, and that prosecuting the defendants herein but not others who have engaged in similar activities constitutes selective prosecution which deprives defendants of equal protection of the law. It is the prerogative of the executive to initiate criminal proceedings, see United States v. Cox, 5 Cir., 1965, 342 F.2d 167 (en banc ), cert. denied, 381 U.S. 935, 85 S.Ct. 1767, 14 L.Ed.2d 700; United States v. Raven, 5 Cir., 1974, 500 F.2d 728, 733 & n. 14, cert. denied, 419 U.S. 1124, 95 S.Ct. 809, 42 L.Ed.2d 824 (1975); United States v. Ream, 5 Cir., 1974, 491 F.2d 1243, 1246, and at this pretrial stage of the present case we hold that the courts are not to interfere with the free exercise of the discretionary powers of the attorneys of the United States in their control over criminal prosecutions. United States v. Cox, supra, at 171. In Newman v. United States, 1967, 127 U.S.App.D.C. 263, 382 F.2d 479, the court held that the decision to prosecute one person rather than another is not reviewable, and that it is not the function of the judiciary to review the exercise of executive discretion in this regard. Id. at 482 (Burger, J.) 36 Moreover, this Court held in United States v. Raven, supra, a case in which a similar defense was raised, that Raven's argument that his conviction should be set aside because he was singled out as the first subject of a criminal prosecution, despite the presence of numerous other violations of the same criminal statutes by others, was insufficient of itself to require reversal. 500 F.2d at 733. 37 Defendants' contention that the prosecution here is in bad faith because of selectivity must fall in the face of these authorities and of the undisputed information furnished by the United States relative to the numerous conferences afforded defendants and their counsel at the highest levels of the Attorney General's office prior to presentation of the matter to the Grand Jury. 38 Defendants further assert that this prosecution contravenes the public policy of the United States by attempting to regulate private business through criminal prosecutions. It is not for the courts to decide whether a criminal prosecution contravenes some vaguely defined public policy. Indeed, it has been stated that public policy favors the unencumbered enforcement of criminal laws . . . . United States v. St. Regis Paper Co., 2 Cir., 1966,355 F.2d 688, 693. If an indictment sufficiently alleges a violation of the laws of the United States, and the prosecution of that indictment is not precluded on constitutional grounds, cf. United States v. Laub, supra ; Raley v. Ohio, supra, the courts may not dismiss an indictment on grounds of public policy. 39 Finally, defendants allege that they are denied due process by being subjected to prosecution in this case. Many of the arguments in support of this contention are not properly before us at this stage of the case. Defendants' argument is, in short, that they are innocent and therefore should not be prosecuted. But guilt or innocence is a decision which may properly be reached only after trial on the merits and not before. Cf. United States v. Brown, 8 Cir., 1973, 481 F.2d 1035, 1041. The indictment was therefore improvidently dismissed and must be reinstated. We emphasize that in reversing the district court and remanding the case for further proceedings, nothing we have said in this opinion is to be construed as intimating any view whatever as to the guilt or innocence of the defendants or as to the case's disposition at trial. We hold only that a Grand Jury having sufficiently alleged in an indictment that defendants conspired to commit a criminal act, and the prosecution not being constitutionally improper, the Government must be given an opportunity to prove its case before the trier of fact. 40 Reversed.