Opinion ID: 414470
Heading Depth: 2
Heading Rank: 5

Heading: Mens Rea for Companion Sec. 1005

Text: 43 As noted in Part II.B., supra, the predecessor to Sec. 656 was 12 U.S.C. Sec. 592 (Rev.Stat. 5209). In 1948, Congress separated Sec. 592 into three distinct sections: Sec. 334, a seldom-invoked provision which deals with the issuance and circulation of Federal Reserve Notes; Sec. 656; and Sec. 1005, which deals with false entries in bank records and the wrongful issuance of bank obligations. The Reviser's Note accompanying Sec. 656 indicates that the reason for the division of Sec. 592 into separate sections was that [t]he original section, containing more than 500 words, was verbose, diffuse, redundant, and complicated. In addition, the notes accompanying Sec. 656 and Sec. 1005 both state that the revision was not intended to change the meaning or substance of existing law. 44 This historical background suggests that the mens rea standard for Sec. 656 should be consistent with the standard for the crime of making false entries under Sec. 1005. Both offenses derive from the same predecessor statute, and both require the government to prove that the defendant had intent to injure or defraud the bank. 17 Thus, we believe it is significant that none of the circuit courts of appeals have held that a reckless disregard of the interest of a bank is the proper mens rea standard for Sec. 1005. Moreover, two circuit courts recently have reversed convictions under Sec. 1005 because the jury instructions permitted a guilty verdict based upon a finding of recklessness. 45 One of the recent cases reversing a Sec. 1005 conviction was United States v. Welliver, supra, the same decision which permitted a recklessness standard for Sec. 656 violations in this circuit. The court reversed the Sec. 1005 conviction because the trial judge had charged that reckless disregard was the equivalent of intent to injure or defraud under Sec. 1005. The court stated that [a]s pertains to Sec. 1005, [the Fifth Circuit] has never held 'recklessness' to be sufficient to satisfy the specific intent requirement, nor do we think it should be. 601 F.2d at 210. The court went on to note that [w]hen a trial judge in his instructions refers to 'recklessness', no more is necessarily implied than such mere negligence, carelessness, thoughtlessness, or inadvertence as could not be regarded as the equivalent of an intentional wrong. Id. 46 Similarly, in United States v. McAnally, 666 F.2d 1116 (7th Cir.1981), the Seventh Circuit reversed a Sec. 1005 conviction because the trial court had instructed the jury that [a] reckless disregard by a bank official of his bank's interest is sufficient to establish the requisite intent to defraud. Id. at 1118. The court held that the false-entry offense is one of intent and not of carelessness, id. at 1119, and persuasively explained the strong policy reasons influencing its decision. The court stated: 47 There must be at least a hundred thousand bank officers in this country, many of them, like McAnally, young and inexperienced employees of small and unsophisticated banks. These officers make in the aggregate millions of entries in the books of their banks every day; no doubt many of those entries are inaccurate; and many of the inaccuracies are probably due to negligence, some of it gross. We do not think Congress meant to expose all of these bank employees to felony prosecutions; the danger that the heavy penalties prescribed in section 1005 would overdeter, with resulting social costs vividly described in a different context by the Supreme Court in United States v. United States Gypsum Co., 438 U.S. 422, 440-43, 98 S.Ct. 2864 [2875-76] 57 L.Ed.2d 854 (1978), would be too great. 48 Id. 49 We believe that the policy considerations which prompted the Welliver and McAnally courts to hold that recklessness is not sufficient to satisfy the specific intent requirement of Sec. 1005 also apply to Sec. 656. For example, the same bank employees who make entries in bank books which might result in a false entry also make loans which might constitute a misapplication. In either case, we do not believe that Congress intended that bank employees engaged in routine transactions, such as making book entries or making loans, should be exposed to felony prosecutions unless they act knowingly. Thus, we believe that the rules which courts have developed for Sec. 1005, establishing knowledge as the proper mens rea standard and requiring that the jury instructions do not equate recklessness with intent to injure or defraud, also should be applied to Sec. 656. 50