Olmstead v. United States

• Decision Date: 19 November 1928
• Docket Number: No. 5532.,5532.
• Parties: OLMSTEAD et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Ninth Circuit

29 F.2d 239 (1928)

OLMSTEAD et al. v. UNITED STATES.^*

No. 5532.

Circuit Court of Appeals, Ninth Circuit.

November 19, 1928.

Chester A. Sheppard, Sheppard, Phillips & Ralston, and Martin L. Pipes, all of Portland, Or., for appellant Olmstead.

Joseph, Haney & Littlefield and John C. Veatch, all of Portland, Or., for appellant Wheeler.

George Neuner, U. S. Atty., of Portland, Or.

Before RUDKIN and DIETRICH, Circuit Judges, and NORCROSS, District Judge.

DIETRICH, Circuit Judge.

At all times herein mentioned appellant Emery Olmstead was a director and the president of the Northwestern National Bank of Portland, Or., actively engaged in the transaction of its business, and appellant Wheeler was a large stockholder and customer of the bank. Through corporations and in his own name Wheeler transacted business on an extensive scale and carried several accounts in the bank, referred to in banking circles and the record as "the Wheeler lines." To some extent the two were associated in business other than the bank. One of the companies operated by Wheeler was the McCormick Lumber Company, carrying on a lumbering business at McCormick, Wash., and in the main its relations and dealings with the bank constitute the subject-matter of the record.

Both appellants were acquitted on the first count in the indictment, charging them with conspiring to misapply the funds of the bank, and were convicted and by the court adjudged guilty upon each of the other 22 counts charging Olmstead with the misapplication of funds and Wheeler with aiding and abetting him in such misapplication. The method by which the government contends the bank was despoiled consisted of the honoring of checks or drafts drawn upon it by the McCormick Lumber Company through Wheeler, its president, when in fact it had no funds in the bank for the payment thereof, as both of the defendants knew.

Under their first assignment, appellants urge that it was error to overrule their demurrer challenging the sufficiency of the indictment. Stated in brief, their contentions are (1) that the indictment fails to charge that Olmstead was vested with power to honor the checks; (2) that it fails to charge that Olmstead honored such paper as president of the bank, or without the consent of its board of directors; (3) it fails to set out in form or substance the credit appearing in the books of the bank in favor of the McCormick Lumber Company, referred to as false and fictitious, or to exhibit any facts showing that such was its character; and (4) that it fails to charge Olmstead had knowledge that it was false or fictitious.

As said by Mr. Justice Brown, speaking for the court in Cochran v. United States, 157 U. S. 290, 15 S. Ct. 630, 39 L. Ed. 704:

"Few indictments under the national banking law are so skillfully drawn as to be beyond the hypercriticism of astute counsel — few which might not be made more definite by additional allegations. But the true test is, not whether it might possibly have been made more certain, but whether it contains every element of the offense intended to be charged, and sufficiently apprises the defendant of what he must be prepared to meet, and, in case any other proceedings are taken against him for a similar offense, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction. Evans v. United States, 153 U. S. 584, 587, 588 14 S. Ct. 934, 38 L. Ed. 830; Batchelor v. United States, 156 U. S. 426 15 S. Ct. 446, 39 L. Ed. 478."

We are of the opinion that fairly construed the indictment meets this test. With the exception of dates and amounts the several counts are in identical language, and we may therefore specifically refer to the second as typical of all. It alleges that on December 13, 1926, at Portland, Or., Olmstead, being a director and the president of the bank, the national status of which is fully set forth, and "being then and there actively engaged in the management of the business and affairs" thereof, "and, as such director and officer, possessing such a power of control, direction, and management over the moneys, funds and credits * * * as enabled him to take part in the committing of the offense" charged, and being such director and president, "and having the power of control, direction and management over the business and affairs" of the bank, "with intent then and there to injure and defraud" the bank, he did unlawfully and willfully misapply the funds and credits in the sum of $3,035.23, by transferring and converting the same to the use of the McCormick Lumber Company, by honoring and paying that company's check on the bank in that amount, when as Olmstead well knew "no such sum then stood to the credit of said corporation with or upon the books of the" bank for the payment thereof, "except a false, fraudulent and fictitious credit, and no security then was or had been given for the repayment" of the money, "and when, as said Emery Olmstead then and there well knew, the company was in a failing and insolvent condition and unable to pay its debts or meet its obligations and had no reasonable prospect of being able to do so," so that Olmstead then and there well knew "there was every probability that the said sum of money would be, as it in fact was, wholly lost to" the bank.

Together with the averments so in substance set forth are others to the effect that Wheeler knowingly and feloniously aided and abetted Olmstead in making such misapplication. A charge of similar form was under consideration in Coffin v. United States, 156 U. S. 450, 15 S. Ct. 401, 39 L. Ed. 481, and the court there said:

"We take the second as an example. That charges that Haughey, being president of the Indianapolis Bank, did then and there by virtue of his office as president of said bank unlawfully, feloniously, and willfully misapply the moneys, funds, and credits of the bank, with intent to convert the same to the use of the Indianapolis Cabinet Company, by then and there causing said sum to be paid out of the moneys, funds, and credits of the bank, upon a check drawn upon the bank by the Indianapolis Cabinet Company, which check was then and there cashed and paid out of the funds and credit of the bank; which sum, and no part thereof, was the said Indianapolis Cabinet Company entitled to withdraw from the bank, because said company had no funds in the bank, and that the said company was then and there insolvent, which Haughey then and there well knew, whereby said sum became lost to the bank. This clearly states the misapplication and actual conversion of the money by the methods described, that is to say, by paying it out of the funds of the bank to a designated person when that person was not entitled to take the funds, and that owing to the insolvency of such person the money was lost to the bank. The fact that the count charges the intent to convert money to the use of the Indianapolis Cabinet Company does not obliterate the clear statement of the actual conversion. In this regard the count is clearer and stronger than that held sufficient in Evans v. United States, supra."

We think the relation of Olmstead to the bank and his authority and power over its business and funds are sufficiently alleged. It was unnecessary to charge in what manner he came into control. If, as averred, he in fact exercised control and actually managed the business, it is immaterial whether his authority originated in a formal resolution of the directors or resulted from their acquiescence and informal consent. Evans v. United States, 153 U. S. 584, 14 S. Ct. 934, 38 L. Ed. 830; Claasen v. United States, 142 U. S. 140, 12 S. Ct. 169, 35 L. Ed. 966; United States v. Northway, 120 U. S. 327, 7 S. Ct. 580, 30 L. Ed. 664. Nor was it necessary to aver that in misapplying the funds of the bank he acted without the knowledge or consent of the directors. United States v. Eno (C. C.) 56 F. 218; Flickinger v. United States (C. C. A.) 150 F. 1; United States v. Morse (C. C.) 161 F. 429; Sheridan v. United States (C. C. A. 9th) 236 F. 305.

While the averments touching the "fictitious credit" might with propriety have been amplified, it is to be borne in mind that the reference thereto is only explanatory of the manner in which the offense, otherwise charged, was committed. It is alleged that on a day certain Olmstead with intent to injure and defraud the bank, unlawfully, feloniously, and willfully misapplied $3,035.23 of the bank's funds. That is the offense. He committed it by turning over the funds to the McCormick Lumber Company upon its check, when he well knew that no such sum stood to its credit, except a false, fraudulent and fictitious credit. Under a fair construction, we think the language imports knowledge that such credit as the McCormick Company appeared to have was in fact fictitious. Coffin v. United States, 156 U. S. page 448, 15 S. Ct. 394, 39 L. Ed. 481. All the elements of the offense were alleged, the manner in which the misapplication was made is clearly specified, and, if defendants desired greater certainty as to the character of the fictitious credit, they should have asked for it by special demurrer or demand for a bill of particulars. See Sheridan v. United States (C. C. A.) 236 F. 305; Jewett v. United States (C. C. A.) 100 F. 832, 53 A. L. R. 568.

A brief explanation of the general features of the case made by the voluminous evidence will be of aid in determining what, if any, merit there is in the other assignments urged upon our consideration. The specific misapplications covered by the several counts are all alleged as of dates in December, 1926, and February, 1927. The first count, however, charges a conspiracy covering the period from October, 1924, to March 2, 1927, and the evidence, much of it directly or remotely pertinent to the charges now under consideration, covers this entire period, and especially the last 11 months thereof. It seems that on October 9, 1924, the bank's board of...