Court Opinion

ID: 9479915
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:32:45.594456+00
Date Added: 2024-06-11T17:47:22.134356
License: Public Domain

WINTER, Circuit Judge,
concurring in part and dissenting in part:
I concur in affirming Castiglia’s conviction for false statements on the bank questionnaires and in Liffiton’s conviction for perjury. However, I respectfully dissent from the various convictions for conspiracy, for the misapplication of bank funds, for the making of false entries in bank records concerning the loans in question, and for aiding and abetting the misapplication and false entries.
The sole reason for my dissent is my inability to reconcile the present decision with that in United States v. Docherty, 468 F.2d 989 (2d Cir.1972) (Friendly, C.J.), which reversed a conviction for aiding and abetting the misapplication of bank funds and making of false statements in factual circumstances identical to the present case. In Docherty, one Evans, a bank officer, persuaded a credit-worthy friend, Docherty, to obtain loans in Docherty’s name from the bank to be given to Evans who promised Docherty that he, Evans, would repay them. Evans told Docherty that this arrangement was necessary because the bank would not lend its funds to an officer and frowned upon officers borrowing from other banks. Docherty gave Evans the coupon book, and Evans undertook to repay the bank directly. 468 F.2d at 991.
Docherty held that the defendant’s failure to disclose the real recipient of the loan, and in one instance stating that the loan’s purpose was “personal,” did not violate the prohibition on false statements. Id. at 992. It further held that “knowledge that the proceeds of the loans were going into Evans’ hands in violation of the bank’s internal rules,” id. at 993, was not enough to constitute aiding and abetting of the misapplication of bank funds, id. at 995. The basis for this latter holding was the majority’s conclusion that there was no proof that Docherty intended to injure the bank because he “knew he was putting his own credit on the line, and it [was] not suggested that he lacked the means to repay.” Id.
The facts in the instant case are identical. Santiago was eminently credit-worthy. He had previously borrowed millions of dollars from the bank, and Castiglia was within his authority in lending the $580,000 to Santiago on his signature. The government never suggested to the jury and has not suggested to us that Santiago’s obligation to the bank was invalid. In his summation, the prosecutor characterized the transaction as a loan by the bank to Santiago and a “reloan” by Santiago to Castiglia. See, e.g., Trial Transcript at 22-66 (Sept. 20, 1988). When Santiago instructed his bookkeeper to put the note in Castiglia’s file, Santiago wrote a notation on the note indicating that Castiglia was going to send a life insurance policy with Santiago as beneficiary in the amount of $580,000. Later, when his accountant indicated to Santiago that he might have insufficient documentation to hold Castiglia liable if the note was unpaid, Castiglia was made to sign a promissory note for the unpaid balance and thereafter made the payments to Santiago who passed them on to the bank. Santiago’s credit was thus *539“on the line.” See Docherty, 468 F.2d at 995.
The purported distinction relied upon by my colleagues is that in Docherty the money was “reloan[ed]” to the bank officer whereas in the instant matter the borrower was told, in the words of my colleagues, “that he would not be looked to for repayment.” The same statement could as well describe the borrower in Docherty, who gave Evans the coupon book with the expectation that Evans would repay the bank directly. The distinction relied upon by my colleagues thus escapes me. It also escapes the government, which at trial explicitly characterized the transactions as a loan to Santiago and a “reloan” to Castiglia. Finally, the distinction escapes the accountant whose testimony is the basis for my colleagues' conclusion that Santiago was told he “would not be looked to for repayment.” 1 The accountant also treated the transactions as a loan to Santiago and re-loan to Castiglia and therefore caused Cas-tiglia to sign a formal note.
Confusion is certain to emanate from the present decision. In future cases, prosecutors will avoid the word “reloan” and elicit testimony from a witness that the borrower was assured that he or she would “not be looked to for repayment.” Defense attorneys will get the same witness to describe the transaction as a “reloan.” Any such witness, of course, like the accountant in the instant case, will understandably and correctly believe the words to mean the same thing, but district judges will then have to charge the jury that they must convict in one case but not in the other. I shrink from speculating about the result on appeal.
The actual distinction drawn by the cases, of course, is between assurances by a bank officer that the borrower will not be looked to for repayment because the officer will repay and a similar officer who gives assurances that the bank will not look to the borrower if the loan is not repaid. My colleagues rely heavily upon a quotation from United States v. Gens, 493 F.2d 216 (1st Cir.1974), indicating that a misapplication will be found where “bank officials assured the named debtor ... that they would look for repayment only to the third party who actually received the loan proceeds.” Id. at 222. However, the government never claimed in the instant case that Santiago was told, much less believed, that the bank would not enforce the note against him. Santiago was himself in part a money lender, and the government in no way suggests that he had, or thought he had, any defense under New York law to a suit against him by the bank if the note was not paid. Indeed, although Santiago took measures to conceal the real nature of the transaction, his behavior with regard to the life insurance policy and Castiglia’s later execution of a formal note clearly indicate that Santiago believed he was liable on the note if unpaid. Indeed, the government’s brief describes the cause of the execution of that note by Castiglia as follows: “Santiago now owned [sic] money on the other loan — and immediately looked to Castiglia for payment.” (Emphasis added). Brief of Appellee at 17.
The fact that Castiglia and Santiago and Liffiton engaged in devious behavior in transferring the funds is irrelevant under Docherty. Santiago and Liffiton may have helped Castiglia to conceal his outside employment from the bank, but that is not enough under Docherty to prove an intent to injure the bank through a misapplication of funds. Judge Friendly expressly stated in that case that knowledge that a loan may violate a bank rule will not support a conviction for aiding and abetting under Section 656, 468 F.2d at 993, where the borrower puts “his own credit on the line, and it is not suggested that he lacked the means to repay,” id. at 995.
*540Having said all this because I simply cannot reconcile Docherty and the instant case, I will confess some uneasiness with the Docherty holding because, as foreshadowed by Judge Lumbard’s dissent, it carries with it implications for principals as well as aiders and abettors. Judge Lum-bard noted in that dissent that if the borrower knows that the loan is in his name solely as a means of avoiding bank rules concerning loans to officers and if that conduct is not enough to prove an intent to injure the bank, then the officer as well as the aider and abettor will escape liability. 468 F.2d at 996-97 (Lumbard, J., dissenting). It may be, as the government has stipulated, that Santiago’s wealth eliminated any practical risk to the bank in this transaction, and it may also seem harsh to charge someone who has put his own wealth at risk to the bank with criminal conduct injuring the bank. But that conduct surely facilitated a bank officer’s knowing evasion of common and necessary bank rules designed to prevent misapplication of bank funds. I am thus far from certain that Castiglia has not violated Section 656 and the false entries statute in the instant case. Precedents from other circuits collected in footnote 5 of Judge Kaufman’s opinion hold that such conduct by a bank officer is criminal. However, if Cas-tiglia did violate the statute, then Santiago and Liffiton surely aided and abetted him.
Had my colleagues sought to overrule Docherty, either by an in banc decision or through our informal practice of circulation before publication to allow our colleagues to comment or seek an in banc ruling, see United States v. Reed, 773 F.2d 477, 478 n. 1 (2d Cir.1985), I might have agreed with them on the merits. Because they have chosen to leave Docherty in place, with the confusion that will surely follow, I therefore have no choice but to dissent.
Because Castiglia’s conviction for false statements on the bank questionnaires and Liffiton’s conviction for perjury are unrelated to the ground for my dissent, I concur in their affirmance. I dissent from the convictions on the other counts for the reasons stated. A final comment on the conspiracy count is necessary. That count included: (i) Castiglia’s false statements on the questionnaire; (ii) the failure to disclose Castiglia as the ultimate recipient of the loan proceeds on the loan documents, and (iii) the misapplication of bank funds. Because there were no special verdicts, we cannot tell whether the jury found that the defendants were guilty as to (i) above, a conviction I would be willing to affirm. I would therefore remand the conspiracy count for a retrial.

. The accountant’s actual testimony was as follows:
Q. Do you recall the content of that conversation you had with Mr. Santiago on this subject?
A. In essence, I was inquiring as to his recollection as to what had transpired, when he borrowed the money, how he did, for what purpose, general conversation to try to record the transaction.
Q. Did he respond to you?
A. Yes, he did.
Q. What did he say?
A. He asked me to contact Peter Castiglia. He borrowed the money from the bank for Peter Castiglia and he took care of all the transactions.
Q, He meaning whom?
A. Mr. Castiglia.
Q. Did he make any remark at all as to who was responsible for repayment?
A. Yes.
Q. What did he say?
A. He indicated that Mr. Castiglia was responsible.
Trial Transcript at 7-227 (Aug. 24, 1988).