United States v. John R. Adamson, III

RIVES, AN- Before KRAVITCH and DERSON, Judges. Circuit ANDERSON, III, R. LANIER Circuit Judge: Adamson, III, appellant, John R.

three others were indicted under 18 U.S. 1, 10052, 10143, (West C.A. and 24 §§ 1976) in connection several loans made Augusta the First Bank and Trust Com trial, pany. appellant was After a misapplica convicted of one of count willful tion of in one bank funds violation of § books, making entry count of a false in the reports, and statements of the bank in vio of lation of 1005 and and three counts §§ knowingly false making statements to purpose influencing bank for the of loan pertinent provides part: provides pertinent part: 1. 18 in U.S.C.A. 3. 18 in U.S.C.A. Whoever, officer, director, being agent an knowingly any state- Whoever makes false employee any or of ... Federal Reserve report, ment or . . . for the influ- Bank, bank, member national bank in- or way encing any any in action of . . . bank, willfully misapplies any sured ... depоsits which are insured moneys, credits funds or of such bank Deposit Corporation Federal . Insurance . . ., $5,000 . . shall be fined more not than or advance, discount, upon any application, . . . imprisoned years, not more than five or commitment, loan, any change or or or ex- both.... same, any tension of . . . shall be fined $5,000 imprisoned not more than or more not provides pertinent part: U.S.C.A. years, than two or both. any entry any Whoever makes false book, report, or statement such bank with provides pertinent part: 4. 18 U.S.C.A. 2§ bank, any intent to or defraud such or (a) against commits an Whoever offense company, body politic corporate, other or or aids, counsels, abets, the United or any person, individual or to deceive offi- commands, procures or induces its commis- bank, Comptroller cer of such оr the sion, punishable principal. is as a Currency, Deposit or the Federal Insurance (b) willfully to be Whoever causes an act Corporation, any agent ap- or examiner directly performed by done which if him pointed bank, to examine the affairs of such against Unit- another would be offense or the Board of Governors of the Federal punishable principal. ed as a System— Reserve $5,000 Shall be fined not more than imprisoned years, not more five or both. than corporations were tions and not applications in violation of §§ capable count acquitted financially repaying on one the loans. misapplication under testimony each of willful at trial that There was further 1005. Adam- and of false entries directly Holley of these loans seeking.review this court appeals son legal aggre- would have violated the bank’s jury, to the the district court’s instructions gate lending and unsecured loan limits. evidence, and the sufficiency directly Holley Making these loans evidence. admissibility of certain through corporations also violated the these limitations, lending law but structur- state I. FACTS. loans in this fashion made detection During by covered the indict- times of these violations difficult and tended to ment, presi- was the appellant Adamson deceive the bank and the bank examiners Augusta dent First and a director of the Thus, about the true state of affairs. Company; Bank and Trust he also served case, government’s theory of the lending as a officer and was a member of appellant Adamson authorized a series of bank’s Loan and Investment Commit- corporate sham loans nominal borrowers serving capacities, tee. While illegal potentially to conceal unsafe appellant participated processing in the single concentration of bank loans to a approval of four substantial loans that debtor. formed the indictment. The basis of the ostensibly first of these loans was made to II. THE JURY INSTRUCTIONS: SEC- Summit, Inc., although the Island actual TION 656. beneficiaries of this loan were co-defend- appeal primary The focus on Eugene Holley R. B. ants Glenn Hes- trial to the has been the court’s instructions was to look to these ter.6 The bank benefi- jury. appellant The contends that the court this loan. The repayment ciaries for defining requisite for the erred appellant willfully misap- was convicted of mental state the accused must have to com- (§ plying 656) funds false en- misapplication mit willful of bank funds tries in the bank’s bоoks and records (West 1976). under 18 In U.S.C.A. § (§ 1005) in connection with this loan. The objects particular, second loan was made in the name of Au- charge that: Summit, Inc., gusta proceeds but the went disregard A reckless of the interest of repayment expected to and was from Hol- equivalent the bank is the of the intent to The ley. named borrower in the third loan injure or defraud the bank. Co., Fairway yet again was Holley Finance proceeds respon- received the loan and was repaying Similarly,

sible for the loan. charge you I that the element of crimi- Poplar fourth loan was made to Finance necessary for conviction for a nal intent Co., Holley again being the actual is misapplication willful of bank funds repayment. beneficiary and source of The showing mere of indis- not fulfilled knowingly was convicted of mak- рart of the or foolhardiness on the cretion (§ 1014) ing a false statement to the bank must amount bank officer. His conduct in connection with these last three loans. inter- reckless of the bank’s . ests . . government introduced evidence corpora- the named borrowers were inactive Committee, attorney Augusta bank. These for the 5. The First Bank and Trust Co. is counts, Deposit insured the Federal Insurance Cor- on several defendants were convicted poration. pursue appeals. but have declined Fink, defendant, fourth Jack E. Chairman Holley law Co-defendants and Hester were Bank, acquitted on all the Board of the was partners. and business Hester also was a ma- charged. counts under which he was jor stockholder in the bank and served as a director, a Finance member of the Loan and employed proving requisite

The word “willful” is also tion’s burden of state thing ground Sandstrom, characterize a without done for mind the offense. lawful, believing for it or conduct statutory mens rea the disregard, marked a reckless whether prove Yet, dispute. was not in right not one has the to so act.7 assessing whether a instruction im- properly government’s lowers the burden of argues The appellant “spe- 656 is a proof, a threshold inquiry must be to deter- (or, cific intent” alternatively, crime government’s mine the burden of “general crime) least a intent” and to vio- —i. e., concerning when an instruction the ac- late (/. e., 656 one must have the issue, cused’s state of mind is the what is “specific intent”), knowledge (/. or at least requisite mens rea for the crime? e., “general intent”), defrauding injur- ing the bank. The charge, district court’s 656 of Section Title 18 of the United argues, impermissibly lоwered prescribes punishment States Code government’s the proof by equat- burden of bank official “willfully misapplies” who ing the lesser mental state of “recklessness” funds, but the statute does not define required higher with the “pur- mens rea of “willfully.” uniformly The courts have con pose” “knowledge.” or The con- strued .the statute to include the “intent to tends govern- that such a reduction in the injure or defraud the bank” as a material ment’s burden process of violates due element of g., the crime. E. jury rights and trial and contravenes the Farrell, 816, (5th 1980); 609 F.2d 819 Supreme Court’s decision in Sandstrom v. Mann, 517 F.2d 267 Montana, 442 U.S. 99 S.Ct. 61 (5th denied, 1975), and n. 3 cert. 423 (1979). L.Ed.2d 39 U.S. 96 S.Ct. (1976); States, Seals v. United 221 F.2d In Sandstrom the Court reversed a con- 1955). viction for “purposefully or knowingly” causing the death of another because the ‍​‌‌​​‌‌​‌​‌‌‌‌​‌​‌​​‌‌‌​​‌​‌​‌‌​​‌‌‌​​‌‌‌​‌‌‌​​​‍“intent,” The “willfully” terms and un- jury charged had been pre- that “the law fortunately, statutory have a and common person sumes that a intends the ordinary history law unequivocal. that is less than consequences of voluntary his acts.” The usages, its various may “intent” denote Court held that this instruction unconstitu- the mental state that the American Law tionally created the possibility that a mate- Institute’s designates Model Penal Code (i. e., rial issue the state) accused’s mental “purpose,” or the mental state that would be removed jury’s from the consider- designates Model Penal Code as “knowl- ation prosecution and that would be edge,” general rea, or a notion of mens having relieved of prove beyond a rea- particular mens par- rea a sonable doubt a material element of the ticular crime. Bailey, See United States v. crime.8 394, 403, 624, 630, 100 S.Ct.

Here, Sandstrom, as in challenge L.Ed.2d W. LaFave and A. that Scott, the instruсtion prosecu- Law, reduced the Handbook on Criminal 195-203 charge misappli- presumes The court’s entire on willful structed that the law intent from spanned pages facts; cation under seven certain here the instruction was that also included instructions that act with equivalent ”[t]o certain facts are to intent. The in willfully intent to defraud means to act struction in this case would seem more force cheat,” specific with a intent to deceive or to fully require jury than that in Sandstrom to thing willfully and that “a is done if it is done prescribed to find intent once the facts were voluntarily purposefully specific with a proven. possibility The mere requires, intent to fail to do what the law might “interpret the instruction as automatical say, purpose, is to with an evil a motive or bad intent,” ly directing finding 442 U.S. at disobey whether to the law.” See objеc at was at the heart of the generally Appeal, Record on Vol. VIII at 18-24. 515-19, tion in Sandstrom. U.S. at 99 S.Ct. at 2454-56. See U. S. v. present 8. The form of the instruction 1979); 210 and n. 14 Benchwick clearly case would seem even more to take an S., v. U. n. 5 away issue from the than that invalidated in Sandstrom. In Sandstrom the was in- support. statutory predeces- out some The “willfully” as (1972). Similarly, the term (Rev.Stat. statutes corre in diverse sor U.S.C. employed the different levels of spond import had been construed to hierarchy culpable Model Penal Code’s mens rea roughly equivalent requirement e., (i. knowledge, purpose, mind states of knowledge (and more than mere purpose or recklessness, W. La negligence). for be- recklessness).10 grounds There are 192-94, Scott, supra, at 212-13. Fave and A. requirement mind lieving that the state of to be statute was meant under the оld appellant contends Reviser’s Note to 18 applied to 656. The statute, requires as misapplication willful original sec- asserts: “The the accused U.S.C.A. necessary mental state words, pur- terms, have, tion, containing Penal Code more than 500 Model or, pose injure the bank defuse, redundant, to defraud or verbose, complicat- knowledge that his least, conduct very chang- without .. . The revised section ed. Brief produce this result.9 will tend to meaning or substance any way Appellant at 18-19. law, clarifies, condenses, existing and com- largely rewritten in provisions bines related state of position on the added.)11 (Emphasis style.” manners of 656 is not with- requirement mind 1911) traditional, (“[T]he F. somewhat 9. The uses terminology “specific ambiguous only necessary proved intent” and to be was that the intent making point. “general complаined in this For rea plaintiff intent” in did the acts of error text, expressed preceding modern sons analysts prefer in the purposely designedly.”); States v. or United precise terminology more of the Fish, 585, (C.C.S.D.N.Y.1885) (”[T]he 24 F. 588 culpable hierarchy the Model Penal of Code’s good in exercise of official discretion honest faith, States, Bailey v. United states of mind. See fraud, advantage, sup- or without for the 630-32, 394, 403-05, 624, 62 444 U.S. 100 S.Ct. pun- posed advantage, is of the association not (1980). L.Ed.2d 575 jury charge In the the were care- ishable .... fully not to be instructed that the accused was States, 584, 592, 10. Evans v. United unsafe, irregular, making or convicted for an 594, 938, 934, (1894) 14 S.Ct. 38 L.Ed. 830 loan.”). Prettyman v. United reckless See also (“The criminality upon ques really depends States, 30, 1910) (“The (6th 180 F. 34 was, tion whether discount, the time of the there at cashier, Littich, recklessly of in conduct paying part purpose of a deliberate on the overdrafts, Prettyman, and that of the defendant to the bank of defraud president, upon accepting gravamen insisting in and amount” and “the offense vice design consists in the evil application the mis com- with which excessive accommodations for the woolen added); ....”) (Emphasis is made pany, chief executive of which he was then the Britton, 2 officer, United States v. 108 altogether U.S. reprehensible were most 531, (1883) (The 27 defend L.Ed. 701 reposed lacking in to the trust faithfulness “might ant’s conduct be an act of maladminis mer- them of the bank and the stockholders might part tration on the of the defendant. It gross But its the severest condemnation.... neglect duty, show of official indifference of breach maladministration duty inexcusable trust, interests of of the association or'breach manage- part in the оn the of its officers subject cen the defendant to the severest bank, however disastrous ment of a national office; sure to call it a and to removal from but stockholders, may are be to its such conduct moneys misapplication criminal him of the they punishable within the not unless come association, and funds of the would be to provisions the Revised Stat- of section 5209 of highly penal stretch the statute words of utes.”). limits.”); beyond all reasonable Johnson v. States, 1938) United 818 States, United See also Williamson v. 11. (Error jury to omit instruction that must find 1964) (“The stat F.2d 133 n. 15 knowledge officer “had of defendant bank U.S.C.A, ute, of a recodification § ... financial weakness [the named borrowers’] Therefore, the old 12 U.S.C.A. § former infirmity note.”); Morrissey or pertinent” 12 U.S.C.A. 592 are cases under 1933), Williamson, determining differences to [in 77, 79 cert. denied 293 55 S.Ct. L.Ed. U.S. 656].) (Citation by § between offenses covered omitted). (1934) (Instruction equating reckless act to generally, modified “to the willful one not error where Klock, (N.D.N.Y. F.Supp. 232 233 jury effect that the was not as a mat 1951), grounds, 210 F.2d 215 reversed on other presume ter law to an intent to defraud from legisla- (2nd 1954) (general recklessness...,”); review of mere Pearce v. United another, from one account The decisions of other circuits on the which ef- requirement mind 656 also state of fect, accounting virtue of certain bank position, support appellant’s tend to procedures, par- to these made “loans” third are in accord with the case law under the Although “loans” ties. were ulti- previous ap other circuit has statute. No repaid market mately with full rate inter- equating proved a instruction “reck est, the defendant was convicted of willful injure lessness” with “intеnt or de misapplication allowing for bank funds to generally fraud.” The circuits construe paid obligation out be without a written misapplication provision 656 to repayment. The defendant was also con- require a mental state of either knowl victed of false entries in the bank edge defrauding injur books in violation of ing the bank. in Welliver objected The defendant to a Nevertheless, a careful examination virtually instruction that is identical precedent, particular of Fifth Circuit pertinent part charge at issue 601 F.2d 203 e., here —i. definition reckless “[a] leads us to the conclusion that we disregard of the interest of the bank is the reject are bound to claim. injure equivalent of intent or defraud in Welliver was a bank pres The defendant The court held bank.” that a reck- ident who authorized on behalf of certain parties third inadequately charged the transfer of bank funds lessness instruction history upheld tive of 656 with to the “intent The Sixth Circuit has instruc- “ injure requirement). knowingly or defraud” tion that disregard ‘acts done a reckless for the interests of the bank Parts of former statute 12 U.S.C.A. justify finding of intent to defraud or were also recodified at as well ” alia, the bank’ will because “a reckless § proscribes Title 18. Section inter support injure.” false inference of intent to Unit- entries in bank books and re- ports, supra Cooper, supra, see note ed States v. 577 F.2d at 1083 retains the former statutory Indeed, language, (emphasis added). opinion “with intent in thé same bank,” judicially rejected defraud sufficiency ‍​‌‌​​‌‌​‌​‌‌‌‌​‌​‌​​‌‌‌​​‌​‌​‌‌​​‌‌‌​​‌‌‌​‌‌‌​​​‍such that has been the court the use of stan- read into however, jury’s § 656. The defining Revisor’s Note for dards for task: “We see no “[njo changes also states attempting that value in to transform a test for meaning or substance were made” the reco- sufficiency into instruction to dification. This court has held that a “reck- jury.” Id. at 1085. adequately lessness” charge instruction does not See, injure Larson, g., the “intent to or defraud” ele- 13. e. United States v. 581 F.2d Welliver, 664, ment of (7th § 1005. United 1978); States v. 601 668 Cir. United v. States Gal 203, (5th 1979). F.2d 210 1028, (3rd Cir. lagher, 1978), 576 F.2d 1046 Cir. dismissed, 1040, 713, cert. 444 U.S. 100 62 S.Ct. regard, 12. In this a distinction must be drawn Gens, (1980); L.Ed.2d 674 United States v. 493 appeal between cases where the issue on is the 216, 1974); (1st F.2d 221-22 Cir. United States sufficiency of the evidence and where it is the Fortunato, 79, (2nd 1968), v. 402 F.2d 81 Cir. correctness of the instructions. Where the denied, 933, 1205, cert. 394 U.S. 89 22 sufficiency issue, finding of the evidence is at (1969). L.Ed.2d 463 recklessly may that the defendant acted be enough to sustain a verdict because from See, Arthur, g„ 14. e. States v. 544 United F.2d finding jury may requisite infer the 730, (4th 1976); 736 United States v. Mul Cir. purpose knowledge. mental state of lins, 883, (7th Cir.), denied, 355 F.2d 887 cert. courts, сontext, in this have not held that reck 942, 1465, 384 U.S. 86 S.Ct. 16 L.Ed.2d 540 requisite lessness is the mens rea nor is it a Thomas, (1966). Lippi F.Supp. v. 298 also rea; rather, substitute for this mens these deci 242, (M.D.Pa.1969) (Declaratory judgment sions treat recklessness as a fact or circum concerning action whether conviction for will jury may requi stance from which a infer the holding misapplication ful bars union office un knowledge purpose. site element of See e. Management Reporting der the Labor and g., Larson, United States v. 581 F.2d Act). Disclosure (7th 1978); Cooper, (6th Cir.), denied, F.2d cert. Compare 15. States v. 601 F.2d 99 S.Ct. Unit (5th 1979), Reynolds, n. 13 with Record on ed States v. 573 F.2d 244-45 Appeal, 1978); Logsdon Vol. VIII at 20 21. v. United 1958). requisite by equating mental state for the it disregard § to reckless § offense, alia, entry citing, false inter Sand- Appellant, the bank’s interests. strom v. Montana. United States v. Weiliv- course, argues then that instruc- er, supra, 601 F.2d at 210 and n. 14. Fоr tions so sanctioned Weiliver are uncon- 656, however, misapplication willful under § stitutional, under Sandstrom. We decline upheld charge. Acknowledg- the court appellant’s to follow reasoning. Such a ing injure that the “intent to or defraud” is construction of Weiliver would indeed raise an essential element of both 1005 and §§ grave problems constitutional under Sand- the court observed that for the former strom; such a construction require would section this element is included in the statu- that holding we assume that Weiliver's tory language while for the latter this ele- respect patently with to 656 is inconsist- § judicially imposed. ment is The court then holding ent with its 1005. stated: view, Weiliver, Under the while pertains As this court has held requiring a mens rea of more than reckless- “ ‘reckless of the interest statutes, ness for both on one hand would is, purpose of a bаnk for the of “willful recognize problems equat- the Sandstrom misapplication,” equivalent of intent higher degree recklessness with the ” or defraud.’ culpability required under but on Reynolds, 244-45 approve the other hand would of this same Wilson, quoting United equivalence for 656. We should hesitate Conse- to construe a panel decision of this quently, judge’s the trial instruction was court so as to render it constitutionally sus- correct as to pect and internally inconsistent. We inter- interpreted Id. Weiliver thus has the “in- pret require Weiliver to a different state of tent or defraud” element of will- mind, jury instructions, and hence different misapplication ful import a mens rea of for 656 and 1005.17 §§ merely recklessness. Appellant argues that it would have us was not construe Weiliv- logical er as to construe these related holding requisite statutes mental state knowledge requiring 656 is a different mens rea standard. such a mental state is adequately urges “[tjhis double stan charged, purposes logical but not for dard is not and must not continue.” 3, supra. case, present analysis, See note under this to violate 656 the defendant would have to know that possible interpretation 17. One other of Weiliver ability the named borrower lacked the or intent that would harmonize that decision with the repay, only but the defendant need be reck law in the other circuits does not survive care regard less with to whether such a loan would interpretation begins ful examination. This injure tend to or defraud the bank. Cf. United premise with the that an offense can have a 1028, Gallagher, (3rd States v. 576 F.2d 1046 requirement different state of mind for differ 1978), dismissed, 1040, Cir. 444 cert. U.S. 100 ent elements of the crime. United v. States 713, (1980) (Defendant S.Ct. 62 L.Ed.2d 674 Bailey 394, 405-06, 444 U.S. 100 S.Ct. bank official must know that named borrowers Feola, 62 L.Ed.2d 575 ability loans.) repay lack the or intent to the 420 U.S. 95 S.Ct. (1975). Weiliver, charge approved by however, charge approved The The recklessness in might only analysis; Weiliver be said to refer is not consistent with this to the the consequences any knowledge require- ultimate the acts in was not instructed on —whether question injure will tend to equation or defraud the ments under 656. The bald of reck- § parts bank —and not to the constituent of the less of the interests of the bank with analysis, offense. Under this the defendant in intent ‍​‌‌​​‌‌​‌​‌‌‌‌​‌​‌​​‌‌‌​​‌​‌​‌‌​​‌‌‌​​‌‌‌​‌‌‌​​​‍to or defraud the bank would Weiliver would have violated the statute if he permit, require, indeed seem to the to arranging knew he inwas effect a loan without merely recklessly convict if the defendant al- obligation repayment a written for but need proper lowed a loan withоut documentation to only regard have been reckless with to whether occur. such a loan would tend to defraud (i.e., bank the defendant need not know that 11, supra. 18. See note harm). the loan would tend to cause such entitled implies that the defendant was not argu 3. This

Reply Brief ap given if the benefit of a prevail the court of even addressed to ment is best banc; panel requirement of this as a mental state peals sitting en more favorable a deci power to overrule was oth- court we lack the which the defendant than that to Corrugated In re: prior panel. aby sion erwise entitled. Litigation, 647 F.2d Antitrust Container acknowledge a considerable We 1981); Ford v. United (5th Cir. imposes holding our that § unease with prior (5th A F.2d 357 of recklessness. only a mens rea standard the issue this court has confronted panel of difficulty contribute to our factors Several ade a recklessness instruction of whether holding: inconsistent mens with this charges the mental state quately related statute requirement rea that it does. 656 and has concluded under § construing holding cases clear § Fifth Cir Welliver binds this court. Other pur requiring sug predecessor to language § opinions that have used cuit history suggesting knowledge purpose legislative mens rea gestive pose of a and approving jury change 656 in the course of intended to that 656 was not instructions, Southers, 583 law, United v. holdings States of the the uniform substance 1978), (5th 1306-07 and n. 6 construing 656 to other circuits evidentiary rulings, United affirming knowledge, and purpose or require either Tidwell, v. 559 F.2d States strong dictum to the same effect denied, 1977), cert. However, we are Fifth Circuit cases. (1978), finding the L.Ed.2d 538 Welliver,19 holding of by the bound Farrell, sufficient, v. only by can be entertаined arguments such 1980); sitting en banc. this court Killian, F.2d 1156 to dis conclusion would seem This holding vitiate the of Welliver. do not objec of two of the other pose cases is consist ruling each of these appel instructions. tions holding that 656 takes a mens ent with erred in that the district court lant claims each of these rea of recklessness. Since charging requirement rejected a contention raised “[t]he decisions injure or defraud the defendant, intend to language suggesting defendant the use of by an unlawful act knowledge only be shown a mens rea of Moreover, panel as- we note that had the Welliver 19. We note that in Welliver contrary appeal in trial be- reached the struction, result on the serted on several errors alter the decision would have been low. The court reversed and remanded for a reversal, holding supporting native new trial on the basis of two of the several first, judge binding subsequent panels. challenges: finding McLellan the trial thus on Co., interjected Mississippi Light improperly trial Power & had himself into the 1977) (en banc). We would in such manner and to such an extent as to 925 n. second, say trial; deny finding deci anomalous to that a fair find it somewhat Welliver a holding charge would be but recklessness error with sion in one direction necessary respect Although same issue and under the not decision on the same reverse, pro- would be in the other direction its narrow decision to the court circumstances Thus, reject challenge Welliver’s de we conclude that dictum. ceeded address and holding, and not 656 issue was cision the recklessness instruction with dictum, binding panel. practice appellate on this See Flori and is It is сommon for an Schutte, 103 U.S. Railroad Co. v. court to consider and issues which are da Central decide (1881) (Although fully presented litigated there 26 L.Ed. 327 and which will retrial, ruling prior likely though an alternative of the case was arise on even such deci- the broadly may holding, necessary support “It cannot asserted: sion not be the nar- the Court Harris, authority point on one a case is not row decision to v. be said that reverse. See Cross because, properly although point (D.C.Cir.1969). that was 418 F.2d 1105 n. 64 regular judicial presented practice important course of decided the serves an interest cause, sense, something economy. else of the In we conclude the consideration this broader disposed sustaining panel’s which of the in the end that was found Welliver decision matter.”); v. E. Metal Process Co. was neces- wholе Cold recklessness instruction Bliss, 1960). sary proper disposition that case. W. 285 F.2d to the of done, tendency 1981). the natural of and n. 3 voluntarily Although the law have been to the bank.” may which might appellant in other circuits entitle the 32; Appeal, at Record on Appellant Brief of instruction, to such an United States v. appellant argues VIII 21. The Vol. at that (3rd Gallagher, 576 F.2d charge implies this a mens rea for 656 of dismissed, 1978), cert. U.S. (Brief Appellant only recklessness United 33-34), assuming arguendo but that this is Gens, (1st States v. 221-22 true, charging Welliver sanctions such a holding Welliveds on the mental Yet, mental state. even if the willful mis- requirement might state render application statute a mens rea such an inappro instruction inaccurate and recklessness, higher than the district court priate not, in this circuit. We need how giving did not err in this instruction. The ever, point. gave decide this The trial court phrase “may by” merely permits, be shown equivalent an instruction20 that is direct, jury and does not to draw an charge appellant now seeks and that tracks requisite inference of the mens rea from language of the cases of other circuits Instructing jury certain facts. about Any on which relies. difference permissive such a inference does not create given between the instruction and that Sandstrom, any problems as the requests which the now does not reject accept remains free to the infer- plain rise to the level of error. ence. U.S. at 99 S.Ct. at 514— 2454-55. The instruction removes no issue consideration, jury’s from the nor does it III. JURY INSTRUCTIONS: SEC- relieve the of the burden of TION 1005. proving every material element of challenges also the reck Indeed, crime. where a state of mind is an lessness instructions with to their offense, element of an it is almost invari- jury’s effect on the deliberations on the ably proven by inferences from the facts appellant’s 1005 offense. Here claim and circumstances. A similar instruction takes on posture. a different This court has been sustained this court in United has held that an instruction on recklessness Southers, States inadequately charges the mental state nec 1978). essary to convict under 1005 for footing On similar is the con- books, reports, false entries into bank tention the district erred in fail- court statements. charge that the defendant in F.2d 210 and n. 14 In this case could guilty willfully not be expressly Welliver the trial court instructed misapplying bank funds unless he knew in that reckless ability the named borrowers lacked the equivalent terests bank was repay intent to the loans. The or defraud omission, intent element object did nоt at trial to this plain present thus our standard of review 1005. Id. at n. 13. In the is error. DeLeon, case, judge separated the learned trial pertinent part: fully 20. The instruction reads in the loan and that the named borrower responsibility understands it is his charge you you I if find the defendant loan, repay the such a loan cannot —absent extended credit to a named borrower who properly other be character- financially able at the time of the loan to circumstances — transaction, dummy if ized as a sham or even repay loan, obligated knew that it was bank officials knew that the named borrower repay loan, and that no assurances were pay proceeds party. would over to a third given to it that the bank not look to it to situation,- simply loan, repay event, the bank official has you then in thаt would granted financially capable party, acquit a loan to a be authorized to the defendant of mis- precisely application which what a bank official of bank funds. charge you you I do. that if find the named bor- financially capable repaying Appeal, rower is both Ill Record on Vol. at 22-23. gave he on 1005 from instructions those false statements to the § bank for the gave he on 656. The influencing instructions on § the action of the portion recklessness were confined to the applications. bank on the loan This conten- the charge concerning the tion is without gist appel- offense. merit. The § court, however, argument The district did not define lant’s is that made, prove appellant “intent to failed to that the or defraud” as that lan- guage making, knowingly aided and abetted in jury is used in 1005. Nor was the § Aрpellant false statement. they cautioned that should not contends that apply the the loans which form the basis definition of of these intent to or defraud basically counts “were Holley” loans for Mr. 656 to the 1005 counts. The § § and that the documents and other state- court did not instruct the that a mere presented ments repre- make no finding of recklessness would not in itself contrary.22 Ap- sentations to the Brief of suffice to establish element of intent pellant at 26. required for 1005. The court’s instruc- § tions on the state of mind for 656 are far assessing sufficiency In more elaborate and detailed than those for evidence, reviewing court must examine gave and the court its instructions light the evidence in the most favorable to on 1005 immediately following giv- those government. Sim en circumstances, 656. Under these mons, the jury reasonably could have assumed amply evidence here supports jury’s intent to defraud means the same applications verdict. The loan and files list thing statutes, under both they and that borrowers, ed respectively, as named apply should the definitions of intent Summit, Inc., corporations Augusta defraud offered the court for the Co., Fairway Finance Poplar Finance counts to the A counts. reasonable Co., Eugene Holley. and not R. These doc possibility appellant exists that Holley guarantor uments at best reveal as a have been only convicted for recklessly and not the maker of these loans. The making a entry false in the bank books or corpora named borrowers were inactive records. This impermissible would be an tions, and the loan files were devoid of result under and the appellant’s statements, corporate resolutions, financial conviction under accordingly 1005 must be compa and other information from these reversed.21 proceeds nies. The from these loans went directly personal into the Holley. account of

IV. SUFFICIENCY OF THE EVI- one instance the authorized the DENCE. deposit payable of a loan check Poplar Appellant proof also claims that directly Holley’s Finance Co. into account insufficient support convictions on the notwithstanding the lack proper of a en three counts under knowingly 1014 of payee. dorsement Lastly, respect jury charge, Appellant with to the has asserted somewhat inconsist- appellant originally challenged plain positions attacking error ent instructions sufficiency the district court’s instruction that: and the of the evidеnce. argued has instructions beyond doubt, therefore, Proof a reasonable that he was entitled to an instruction ‍​‌‌​​‌‌​‌​‌‌‌‌​‌​‌​​‌‌‌​​‌​‌​‌‌​​‌‌‌​​‌‌‌​‌‌‌​​​‍that he convincing of such character could not be convicted unless he knew that the you rely willing upon would be and act it ability named borrower lacked the or intent important without hesitation in the most repay contesting the loans. Yet in the suffi- your affairs. evidence, ciency posi- takes the argument At oral counsel for aban- tion that the loans to various named borrowers contention, conceding very doned this really Holley were loans to and that recent Fifth Circuit decision in United States v. expected named borrowers were never to re- Clayton, 1074-75 proceeds repay ceive the the loans. 1981), holds this exact instruction is not plain error. testimony Georgia question Thе heard files in presented them for banking approval state law restricted the loans a to the Loan and Investment Com- files, noted, single person might previously obtain from the First mittee. These as $140,- Augusta strikingly Bank were deficient in information on and Trust to a limit of $280,000 Banking experts 000 for unsecured named borrower. tes- loans and tified that when a bank makes ap- total substantial indebtedness. These restrictions borrowers, corporate loans to new plied such as regardless of whether the loans were here, was customarily the case the bank directly indirectly made to the actual obtains detailed financial information and borrower. The in loans made this case vio- corporate collateral in the form of stock Moreover, lated both of these limits. bank bank, from the debtor. The through the designating exаminers testified that officer, appellant acting lending took corporations in the bank’s books and records neither precautions of these for any of as the named borrowers tended to conceal appellant these loans. The even ordered a identity of the true debtor and deceived pay proceeds teller to of one loan check bank examiners and the bank’s Board of directly Holley’s personal into account de- discovery Directors. This thwarted spite the absence of an endorsement illegal potentially unsafe concentration payee. appellant’s position Given the in the single bank funds loaned to a debtor. the nature of these false state- These examiners they stated that consider ments, jury justifiably could find that such entries in bank books and records to be knew that the loan files he Indeed, false. this court has held that a presented to the Loan and Investment Com- “false statement” within meaning mittee contained false statements. The evi- representing includes to a bank that supports appellant’s dence convictions particular party is to be a borrower on a on the three 1014counts. loan party when in fact that is never in- tended to receive proceeds the loan or have any liability on the loan. United V. ADMISSIBILITY OF EVIDENCE. Clayton, 589 F.2d 195 The Lastly, appellant complains that the evidence more than sufficiently supported a district permitting, court erred in over de-

jury finding that a false statement objection,23testimony by govern- fense bank had been made. ment’s rebuttal witness about a certain

The ample record also revеals evidence cease and testimony desist order. The at- for the conclusion that knew by appellant tacked is that of Arthur Lee that false being statements were made to concerns, pertinent part, Emerson and participated in, the bank and or aided and negotiated certain cease and desist order on in, abetted of these false state- behalf of the bank co-defendant Hester. ments. The constructed the loan The cease and desist order limited the made, representation 23. The record reveals connection with this statements I was the testimony only general objection Now, again going the most made to me. this is be- Appellant yond raised scope co-defendant Hester. as- of what Your Honor’s order joined objection. serts that he in this Brief of is. at 29. Since thе does And point not contest this Honor, and the district court at object, Your I I because have during other times trial stated that he would just my memory recalled to that what the objection consider the of one defendant to be me, question was that Mr. Moore asked he objection all, the appellant we will assume that the asked me did 1 talk to Mr. Emerson about a seasonably join did in co-defendant $50,000 Holley. My was, loan to Mr. answer objection. objections Hester’s of Hester to “I don’t recall such conversation.” I testimony this consisted of: opening up believe that was it. And he’s Honor, may object grounds Your I on the violation I of what consider to be Your Hon- thought I that witness, when we talked about or’s order. going testify he Appeal, to some Record on Vol. VII at 275-76. $30,000 desist order. Record per Appeal, оn Vol. VII at lending to week. bank’s 281-82. suggest brief seems irrelevant. inadmissible as testimony was sum, In we find that the district court committed no reversible error in admitting here, however, at issue The evidence this testimony. highly relevant. was Co-defendant Hester surveying testified in his own behalf his VI. CONCLUSION. career, history, family personal and business conclusion, we hold that the district ties, problems, personal medical philosophy, court committed no reversible error in- so, By doing and civil contributions. Hester structing on the mens rea required attempted good attest to his own charac 656 or on the meaning of “reasona- negate any ter and inference that he had ble doubt.” We also hold that the evidence requisite criminal intent. Such testimo sufficiently supports the convictions on the ny proper under the Federal Rules of three counts under 1014. The appellant By testifying, however, Evidence. so Hes has shown no reversible by error the district opened way ter for the allowing court in testimony concerning the introduce evidence to rebut these claims of do, cease and desist however, order. We good character and lack of intent. See reverse the appellant’s conviction under 404(a)(1) (b).24 Fed.R.Evid. and 1005 and remand the case to the district ap We need not decide whether court because the jury instructions as a pellant may have been entitled to caution whole may have created the im- erroneous limiting instructions the use of this ary pression that recklessness was a sufficient evidence, because did not ade mens rea for that offense. quately request make such a to the trial PART, AFFIRMED IN IN REVERSED preserve the appeal. court nor issue for PART, AND REMANDED. Appellant merely joined general in a most co-defendant, vague objection of his requested limiting no instructions. Ob ON REHEARING AND REHEARING jections grounds and the therefor should be EN BANC particularity. Wright made with GODBOLD, Judge, Before Chief RO- Co., Indemnity Hartford Accident & NEY, TJOFLAT, HILL, FAY, VANCE, 1978); KRAVITCH, JOHNSON, JR., FRANK M. 1183, 1198-99 Arteaga-Limones, HENDERSON, HATCHETT, ANDERSON, denied, cert. CLARK, A. Judges. THOMAS Circuit Fed.R. 103(a)(1). Evid. See also United States v. BY THE COURT: Benton, n. 3 A member of this Administrative Unit of having Court active service requested Moreover, this testimony very was not poll application a on the rehearing en prejudicial appellant. The witness majority banc and a judges in this appellant, never mentioned the and the Administrative Unit in active service hav- transactions about which he testified do not granting voted in favor of rehearing Indeed, appellant. involve the on cross-ex- banc, en acknowledged amination the witness he did not know the at all. The IT IS ORDERED that the cause shall be testimony implicated ‍​‌‌​​‌‌​‌​‌‌‌‌​‌​‌​​‌‌‌​​‌​‌​‌‌​​‌‌‌​​‌‌‌​‌‌‌​​​‍greater to a far de- reheard this Administrative Unit of the Fink, gree acquitted, co-defendant who was argu- Court en banc on briefs without oral appellant. ap- than it did the Neither the ment on a date hereafter to be fixed. other pellant any nor defendant raised will specify briefing Clerk schedule for objection, despite express invitation filing supplemental briefs. so, the district court to do to the introduc- tion into evidence of the minutes a board meeting summarizing the discussion about containing an outline of the cease and argued point Thus, not before this 24. The method which this rebuttal was court. court, properly questions issue not before this made raise some under Fed.R. 405(b). express opinion specific we no on Evid. made no it. objection on this Rule at trial and has based

Case Details

Case Name: United States v. John R. Adamson, III

Court Name: Court of Appeals for the Fifth Circuit

Date Published: Jan 11, 1982

Citation: 665 F.2d 649

Docket Number: 80-7284

Court Abbreviation: 5th Cir.