The opinion of the court was delivered by: NEALON
Defendant, Grier Y. Boedker, former President of the Fidelity National Bank of Pennsylvania, was found guilty by a jury on 92 counts of willful misapplication of bank funds in violation of 18 U.S.C. § 656,
and has moved for a judgment of acquittal or, in the alternative, a new trial. In support of his motion for acquittal, defendant argues that the evidence was insufficient to warrant his conviction and cites several additional grounds in support of his motion for a new trial. In addition, defendant argues that this Court erred in denying his pretrial motion for dismissal of the indictment under the Fifth and Sixth Amendments to the Constitution of the United States and Rule 48(b) of the Federal Rules of Criminal Procedure on the grounds that he had been denied his right to a speedy trial, and that there was unnecessary delay in bringing him to trial.
To sustain a conviction of willful misapplication of bank funds under 18 U.S.C. § 656, it must be proved that (1) the defendant was an officer of (2) a federally connected bank, (3) that he willfully misapplied funds of the bank, and (4) that he made the misapplication with the intent to injure and defraud the bank. United States v. Schmidt, 471 F.2d 385 (3d Cir. 1972) and United States v. Vanetta, 189 F. Supp. 937 (D. Haw. 1960). Defendant argues that there was insufficient evidence of the third and fourth elements presented at trial to warrant his conviction.
Bearing in mind that, in evaluating a motion for a judgment of acquittal, the "evidence and the inferences to be drawn from it must be taken in the light most favorable to the government," United States v. Feldman, 425 F.2d 688, 692 (3d Cir. 1970), the facts that could have been found by the jury are as follows:
During the time specified in the indictment,
June 11, 1971 through July 31, 1971, the defendant was the president of the Fidelity National Bank of Pennsylvania (FNB), a national bank with branches in Danville and Williamsport, Pennsylvania, and was the chief executive officer of the Danville Branch. At the same time, the defendant was also a member of the board of directors and a 10% shareholder of Spread Eagle Farms, Inc. (SEF), a corporation which owned a large farm in Pennsylvania, and which was one of the three largest customers of the Danville Branch of FNB. He was also a member of the finance committee of SEF, where he was kept informed of its financial condition and also participated actively in attempts to obtain financing from certain major corporations, such as Prudential Insurance Company, Heublein, Inc. and Coca Cola, Inc.
The checks were honored by the bank under the express instructions of the defendant. The bank's normal procedure for handling checks drawn on an account in which there were insufficient funds to satisfy the payment demand represented by the check (NSF checks) was for the general ledger bookkeeper, after the bank's computer had indicated which checks were NSF checks, to review them, retaining those that could be collected from the account holder and returning the rest to the forwarding bank. FNB's method of handling the NSF checks of SEF was somewhat different. The bookkeeper took those checks to the defendant, who instructed him to keep them and not return them to the forwarding bank, thereby rendering FNB liable to pay the checks.
(The defendant had previously informed the president of SEF, Elwood C. Williard, that the bank would honor SEF's checks even though there were insufficient funds in SEF's account.) While it is not uncommon for a bank to retain an NSF check when it is reasonably certain that the amount of the check can be collected from the account-holder, it is not a common practice to retain NSF checks when the account-holder has a history of NSF checks. SEF had a history of NSF checks in its account with the Danville Branch of FNB.
Once the bookkeeper had retained SEF's NSF checks, record keeping became a problem. As the checks were not charged to SEF's account,
the bank's records would reflect a discrepancy in the amount of the overdraft checks unless those checks were carried in the bank's books in a manner that did not represent a charge against the bank. At first, the bookkeeper simply resubmitted the checks to the computer in order to balance the bank records; while the checks were "floating" through the computer, they could not be charged against the bank and the records of the bank would balance. This "floating" process would take a full day. Eventually, however, the volume of NSF checks became so large that they were becoming too great a burden to the reconciliation clerk whose job it was to sort out the overdrafts from the computer printouts. The bookkeeper then decided to carry the checks as cash items on the bank's books. A cash item is an item readily convertible into cash; even if it is not so converted for a long period of time (for example as long as six months) it can still be carried as a cash item as long as there is a reasonable belief that it can be collected. Although there was no direct evidence that the defendant specifically instructed the bookkeeper to reconcile the bank's books by either resubmitting the checks to the computer or by carrying them as cash items, the bookkeeper testified that the defendant, with his knowledge of the bank, had to know that, in order to retain these checks and not return them to the forwarding bank, one of these two methods had to be employed in order to balance the records of the bank.
Based on the foregoing facts, the jury could properly have concluded that, given what had to be the precarious financial situation of SEF, the natural result of the defendant's honoring of SEF's overdrafts was to injure and defraud the bank, and that the defendant, given his interest and position in SEF, had at the very least acted in reckless disregard of the interests of the bank in honoring the overdrafts. Whether this conclusion is sufficient to warrant a conviction under the law of willful misapplication will now be considered in detail.
1. WILLFUL MISAPPLICATION
In support of his contention that the evidence was insufficient to establish a willful misapplication under the statute, defendant makes a two-pronged argument regarding the minimum showing that must be made in order to establish a willful misapplication. He argues first, that the transactions alleged to be unlawful must involve more than the mere honoring of overdrafts. Second, he contends that the requisite willfulness is not established unless it is shown that the defendant knew that his actions were prohibited by law.
There is no law specifying what transactions must be involved in order to establish a misapplication within the meaning of the statute. While there is language in several cases to the effect that the honoring of overdrafts without more is not a violation of the statute, see, e.g., Swingle v. United States, 389 F.2d 220 (10th Cir. 1968), United States v. Wiggenhorn, 312 F.2d 289 (9th Cir. 1963), and United States v. Cawthon, 125 F. Supp. 419 (M.D.Ga. 1954), the proper interpretation of that language is that the mere payment of overdrafts in the absence of any other evidence that the payment was made with the requisite intent (to injure and defraud the bank) does not constitute a violation of the statute. See, e.g., United States v. Wiggenhorn, supra (dismissal of indictment alleging willful misapplication affirmed where indictment merely alleged the drawing and cashing of overdrafts; the court specified that the indictment did not allege that the defendant caused the overdrafts to be honored, or that, but for his position as a bank officer, the checks would not have been honored); and United States v. Cawthon, supra (indictment alleging simply that the defendant had honored a check at a time when there were insufficient funds in the account dismissed; no allegation that the defendant even knew that there were insufficient funds in the account). What is necessary to constitute a misapplication within the meaning of the statute, regardless what type of transaction is involved (for example, a loan or the honoring of an overdraft), is that there "be a conversion to his own use or the use of someone else of the moneys and funds of the association by the party charged." United States v. Britton, 107 U.S. 655, 666-667, 27 L. Ed. 520, 2 S. Ct. 512 (1882). As the honoring of the overdrafts in the instant case resulted in such a conversion of the bank's funds, it was sufficient to constitute a violation of the statute, as long as there was sufficient evidence to support a finding of willfulness and the requisite intent.
With respect to the element of willfulness, defendant argues that, in order for the jury's verdict to stand, there must have been evidence introduced at trial from which the jury could conclude that, in honoring the overdrafts, the defendant knew he was violating the law and was acting with the purpose of violating the law.
It is not the law of this circuit that such a showing must be made in order to support a finding of "willfulness" in the context of a criminal violation. See, e.g., United States v. Malinowski, 472 F.2d 850 (3d Cir. 1973) (court approved the following definition of "willfully" given by the lower court in its charge to the jury in a case in which the defendant had been convicted of willfully supplying false information on a withholding exemption certificate: "An act is done 'willfully' if done voluntarily and intentionally, and with the specific intent to do something the law forbids." Id., at 853). Moreover, the ...