Court Opinion

ID: 9470315
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:02:19.369029+00
Date Added: 2024-06-11T17:41:50.141597
License: Public Domain

RONEY and FAY, Circuit Judges, with whom JAMES C. HILL and HATCHETT, Circuit Judges,
join dissenting in part:
Most respectfully we dissent as to the reversal of the 18 U.S.C.A. § 656 conviction for two reasons. In an appendix we have set forth all of the statements made by Judge Alaimo in instructing the jury as to the intent that it had to find to convict the defendant. Reading the instruction as a whole, we believe the jury was not misled as to mens rea required, even under the highly technical, semantic analysis of the Court’s opinion. Although the district court used the words “reckless disregard” and stated that “a reckless disregard of the interest of the bank is the equivalent of intent to injure or defraud the bank,” read as a whole, we think the instruction adequately conveyed to the jury the high standard of proof of intent required and the proper options available to the jury in this case.
Second, it seems to us that with all that is said in the Court’s opinion, there is a level of reckless disregard that translates immutably into the precise intent espoused by the *969majority, with which we have no substantial quarrel. 18 U.S.C.A. § 656 deals with a very limited special group of people. By its very terms this section deals only with officers, directors, agents or employees of covered banks. These individuals have an affirmative duty to protect the funds and assets placed in their care.
As stated by Judge Morgan in United States v. Wilson, 500 F.2d at 720:
It should be remembered above all else that this statute was enacted to preserve the FDIC from loss and to preserve and protect the assets of banks having a federal relationship.
Keeping the legislative history in mind, we have no difficulty in understanding how and why the Fifth Circuit arrived at the point where “a reckless disregard of the interest of the bank is the equivalent of the intent to injure or defraud the bank.” The en banc court is now changing the law of our Circuit, so that these words cannot be used in a § 656 instruction, no matter what other words are also used. It is a subtle change, however, that in our opinion will probably make no difference in the outcome of any trial and would have made no difference in this one. If applied prospectively, we would not even dissent. We should not, however, reverse a conviction on such a technicality.
As we read the Court’s opinion, it will be proper for trial judges to instruct a jury to the effect that in determining whether the defendant is guilty of a willful misapplication of bank funds, it may (or may not) infer such from a reckless disregard of the bank’s interest, if such existed. Then on appeal in determining the sufficiency of the evidence and whether the government has established the necessary intent to injure or defraud the bank, a showing of conduct amounting to a reckless disregard of the bank’s interest will meet this requirement. The distinction between instructing a jury that reckless disregard is the equivalent of the requisite mens rea and instructing it that the requisite mens rea may be inferred from evidence of reckless disregard is so tenuous as to be more meaningful in the classroom than the courtroom.
The Court properly holds that the appropriate mens rea is knowledge. By law a bank officer must know the applicable statutes, rules and regulations controlling the bank’s operations. If such an officer (or official covered by the statute) makes a loan with the level of reckless disregard of those rules and the interests of the bank as defined in the instructions in this case, he has acted knowingly in a manner contemplated by Congress to fall within the ambit of knowing and willful misapplication of the bank’s funds or credit.
This is not mere recklessness or mere disregard. Tying the two words together, coupled with the strong instructions on the intent required, properly conveyed to the jury the level of knowing and willful conduct required. It seems to us that Welliver was correctly decided and that the panel opinion in this matter was equally correct. When we get a case with a charge of “mere recklessness,” defined as little more than negligence, then might be the time for the decision in this case. But here, the instruction was at best correct, at worst contained incorrect words that were harmless when read in context, and the jury’s verdict of guilty should be affirmed.
We concur in the Court’s affirming the 18 U.S.C.A. § 1005 conviction.
APPENDIX
Portions of district court’s charge:
Counts 1, 8, 5, 7, 14, 15, 16, 17 and 18 allege a violation of Title 18 of the United States Code, Section 656 concerning misapplication of bank funds.
* * *
There are three essential elements which must be proved beyond a reasonable doubt to establish the offense proscribed by the law:
First: That the defendant was an officer or employee of the bank described in the indictment;
Second: That the bank was an insured bank; and
*970Third: That the defendant, being an officer or employee, knowingly and willfully misapplied funds or credits belonging to the bank or entrusted to its care. * * *
To “misapply” a bank’s money or property means a willful conversion or taking by a bank employee of such money or property to his own use and benefit, or the use and benefit of another, whether or not such money or property has been entrusted to his care, and with intent to defraud the bank.
Now, to act with “intent to defraud” means to act with intent to deceive or cheat, ordinarily for the purpose of causing a financial loss to someone else or bringing about a financial gain to one’s self.
To misapply “means more than an irregular or negligent use of a bank’s funds (or funds entrusted to the bank).” It means the unlawful taking or conversion of monies, funds, or credits of the bank (or entrusted to the bank) by a bank officer or employee for his own benefit, or for the use and benefit of some other person, done willfully and with the specific intent to injure or defraud the bank.
H< * *
With regard to Counts 1, 3, 5, 7, 14, 15, 16, 17, and 18, all charging misapplication of bank funds, I charge you that an intent to injure or defraud is not inconsistent with a desire for the ultimate success and welfare of the bank.
A wrongful misapplication of funds, even if made in the hope or belief that the bank’s welfare would ultimately be promoted, is nonetheless a violation of this statute, if the necessary effect is or may be to injure or defraud the bank.
I further charge you that with regard to Counts 1, 3, 5, 7, 14, 15, 16, 17, and-18, all charging misapplication of funds under this statute, the words “intent to injure or defraud” appear as an essential element in each of these counts of the indictment. To act with intent to defraud means to act willfully and with a specific intent to deceive or cheat.
“The requirement that the defendant intended to injure or defraud the bank may be shown by an unlawful act, voluntarily done, the natural tendency of which may have been to injure the bank. It is not necessary, however, that actual injury to the bank be shown.
“A reckless disregard of the interest of the bank is the equivalent of intent to injure or defraud the bank.
“It may be reasonable to infer that a person ordinarily intends the natural and probable consequence of his knowing acts. The jury may but is not required to draw the inference and find that the accused intended all the consequences which one standing in like circumstances and possessing like knowledge should reasonably have expected to result from any intentional act or conscious omission. Any such inference drawn is entitled to be considered by the jury in determining whether or not the Government has proved beyond a reasonable doubt that the defendant possessed the requisite criminal intent.”
I further charge you that a willful misapplication for the benefit of borrower or lender, or both, with intent to injure and defraud the bank is a violation of this particular statute.
* * *
I charge you that if you find that a defendant extended credit to a named borrower who was financially able at the time of the loan to repay the loan, knew that it was obligated to repay the loan, and that no assurances were given to it that the bank not look to it to repay the loan, then in that event, you would be authorized to acquit the defendant of misapplication of bank funds.
I charge you that if you find that the named borrower is both financially capable of repaying the loan and that the named borrower fully understands that it is his responsibility to repay the loan, such a loan cannot — absent other circumstances — properly be characterized as a sham or dummy transaction, even if bank officials knew that the named borrower would pay the *971proceeds over to a third party. In this situation, the bank official has simply granted a loan to a financially capable party, which is precisely what a bank official may do.
I charge you that the element of criminal intent necessary for conviction for a willful misapplication of bank funds is not fulfilled by a mere showing of indiscretion or foolhardiness on the part of the bank officer. His conduct must amount to reckless disregard of the bank’s interests or outright abstraction of funds. In short, misapplication, not maladministration, is the crime.
* * *
I charge you that a thing is done willfully if it is done voluntarily and purposefully and with a specific intent to fail to do what the law requires, that is to say, with an evil motive or a bad purpose, whether to disobey or disregard the law. The word “willful” is also employed to characterize a thing done without ground for believing it is lawful, or conduct marked by a reckless disregard, whether or not one has the right so to act.
* * st*
Bad loans made in good faith do not constitute criminal misapplication of funds or monies. When a loan is made in the honest exercise of an official discretion, in good faith and without fraud, for the actual or supposed advantage of the bank, there is no criminal responsibility on the part of the bank officer, although the transaction may be injudicious and unsafe and even though the transaction results in a loss or damage to the bank. The statute does not punish mere acts of maladministration or negligent or careless use of bank funds.
* * *
The word “knowingly,” as that term has been used from time to time in these instructions, means that the act was done voluntarily and intentionally and not because of mistake or accident.
The word “willfully,” as that term has been used from time to time in these instructions, means that the act was committed voluntarily and purposely, with the specific intent to do something that the law forbids; that is to say, with bad purpose either to disobey or disregard the law.