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United States v. Harter.

November 14, 1940

UNITED STATES
v.
HARTER.



Appeal from the District Court of the United States for the Northern District of Indiana; South Bend Division; Thomas W. Slick, Judge.

Author: Treanor

Before MAJOR and TREANOR, Circuit Judges, and LINDLEY, District Judge.

TREANOR, Circuit Judge.

Defendant was tried under an indictment of 16 counts, each of which charged a violation of Section 592, Title 12 U.S.C.A.*fn1 The acts of the defendant, which were alleged to have constituted the offenses with which he was charged, were committed while he was Secretary of the Wabash Valley Trust Company of Peru, Indiana, a state bank insured in the Federal Deposit Insurance Corporation. The jury found him guilty on counts One, two, Three and Ten, which charged the making of false entries on the books and records of the bank, on counts Five, Six, Seven and Sixteen, which charged wilful misapplications of bank funds, and on count Eight, which charged that he embezzled $3,041.75 of the bank's moneys. The court sentenced the defendant to three years' imprisonment and from the judgment of conviction and sentence this appeal is taken.

At the outset it is necessary to consider the general contention of defendant that he cannot be guilty of a violation of the act unless the false entries, misapplications and embezzlement charged in the indictment affect moneys, funds or credits of a depositor which are insured by the Federal Deposit Insurance Corporation. The defendant states the foregoing contention as follows: "The Federal Government and therefore the District Court of the United States has jurisdiction only over the acts of an officer of a state bank by reason of the fact that the same is a member of, and insured by, the Federal Deposit Insurance Corporation, and then only to the extent that the money, funds and credits of the bank insured by the Federal Deposit Insurance Corporation are affected in any manner."

The language of the act expresses no such limitation as that urged by defendant. The act applies to any officer, director, agent or employee of any insured bank who makes "any false entry in any book, report, or statement" of an insured bank with the intent to injure or defraud such insured bank or to deceive any of the designated persons. The provisions also specifically embrace any official, director, agent or employee of any insured bank who embezzles, abstracts, or wilfully misapplies any of the moneys, funds, or credits of such insured bank. There is no exception in the case of one who commits any one of the forbidden acts even though such act does not affect moeny, funds or credits which are insured by the Federal Deposit Insurance Corporation. The obvious congressional intent is to safeguard the integrity of insured banks, and thus indirectly protect the interests of the Federal Depoist Insurance Corporation, by discouraging dishonest acts of those who carry on the business of the bank. This is a reasonable regulation since acts of dishonesty and fraud committed by officers and employees of the bank must adversely affect the integrity of the bank and indirectly affect the risk of the Federal Deposit Insurance Corporation. The imposition of criminal responsibility on individuals who conduct the affairs of an insured bank does not affect state statutory limitations upon the powers of the insured bank and does not enlarge the liability of the bank to those who have business relations with it.

Counts 1, 2, 5, 6, 7, and 16.

The transactions of the defendant which supply a basis for the allegedly false entries charged in counts One and Two are related to the charges of misapplication of "moneys, funds and credits" of the Trust Company in counts Five, Six, Seven, and Sixteen. The defendant caused to be made a sale of stock which belonged to a customer of the Trust Company, such sale being made without the knowledge of the customer. The sale was made to the A. G. Becker Co., investment bankers of Chicago; and the Becker Company deposited the proceeds of the sale to the credit of the Wabash Valley Trust Company in the latter's account with its correspondent bank, the First National Bank of Chicago. The creidt with the First National Bank was reflected in the Trust Company records by two charge items, one in the amount of $8,200 with the notation "Bonds sold, account H-A Circus"; and the other in the amount of $166 with the notation "Addl/sale securities H-A Circus." The basis of the charge items were two charge tickets in the handwriting of the defendant which the defendant handled at the bank window of teller Charles V. Reed; and at the same time deposit tickets, made out in the defendant's handwriting, were presented to Reed. By these deposit tickets, credits corresponding to the charges were shown deposited in the H-A Circus Operating Corporation account; and the ledger sheet of the Wabash Valley Trust Company covering the checking account of the H-A Circus Operating Corporation reflected the two purported deposits.

It is clear from the foregoing that the entries relating to the deposits of $8,200 and $166 in the checking account of the H-A Circus Operating Corporation were false. When the amounts were credited to the checking account of the H-A Circus Operating Corporation its account was overdrawn $1,740.09 and the corporation "deposited" nothing. The entries represented that the H-A Circus Corporation had acquired a deposit credit of $8,366 with the Wabash Valley Trust Company and that the Wabash Valley Trust Company was indebted to the Corporation in that sum. Also, the entries represented that the basis of the deposits was the sale of bonds "sold account H-A Circus." The foregoing entries were false since there was no basis either in fact or in law for the creation of the deposit credit in favor of the Circus Corporation, although the entries enabled the defendant to control for the benefit of the H-A Circus Corporation $8,366 of the "moneys, funds and credits" of the insured bank.

It is not material, from the standpoint of the defendant, whether, as between the owner of the stock and the Trust Company, the proceeds of her stock belonged to her or to the Trust Company. These proceeds had been deposited to the credit of the Trust Company in its correspondent bank, and as between the Trust Company and the defendant this credit represented funds of the Company. On facts involving the same relationship as the facts of this case the decisions uniformly hold that one in defendant's postion must treat funds or credits, such as the $8,366 credit in this case, as funds or credits of the employer-bank. In Bishop v. United States*fn2 an officer of a bank paid accommodation notes of his brother with proceeds of notes and bonds which were held by the bank for collection. In that case it was urged that the money collected did not become part of the bank funds; but the Circuit Court of Appeals held that as between the defendants and the bank the proceeds of the notes and bonds became bank funds. The court further said that if the defendants directed the application of the money collected to the payment of the accommodation notes "they were directing, as far as they were concerned, the application of money which constituted bank funds to the payment of notes which had been taken for their benefit." To the same effect is the reasoning and conclusion in Spencer v. United States*fn3 and United States v. Jenks.*fn4

We approve the reasoning and holding in the foregoing cases and as a result necessarily conclude that when the defendant placed and caused to be placed in the checking account of the H-A Circus Operating Corporation the two credits of $8,200 and $166 there was a misapplication of "the moneys, funds and credits" of the Trust Company to the use of the H-A Circus Operating Corporation, as charged in count Sixteen.

Counts Five, Six, and Seven allege, and the evidence supports the allegations, that the defendant honored or caused to be honored two sight drafts and a check drawn on the H-A Circus Operating Corporation that as between the Circus Corporation and the Trust Company there was no money in the corporation's account. The result was that the drafts and check were paid out of the "moneys, funds and credits" of the Trust Company. The foregoing acts by the defendant constituted misapplications of the funds, moneys and credits of the Trust Company.

Count 8.

Count Eight charges that the defendant received and took into his possession certain moneys, funds and credits in behalf of the insured bank in the amount of $3,041.75 and that the defendant embezzled the moneys, ...


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