U.S. v. Mann

Decision Date07 August 1975
Docket NumberNo. 74-2983,74-2983
Citation517 F.2d 259
PartiesUNITED STATES of America, Plaintiff-Appellant, v. Robert A. MANN and Bank of the Southwest, National Association, Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

Anthony J. P. Farris, U. S. Atty., Houston, Tex., Hugh P. Mabe, III, Atty., Dept. of Justice, Washington, D. C., Henry J. Novak, Jr., James R. Gough, Asst. U. S. Attys., Houston, Tex., Thomas J. McTiernan, Atty., U. S. Dept. of Justice, Washington, D. C., for plaintiff-appellant.

William R. Eckhardt, Harold DeMoss, Jr., Houston, Tex., Seagal Wheatley, San Antonio, Tex., for R. A. Mann.

Morton L. Susman, Chester M. Fulton, Houston, Tex., for Bank of S. W., Nat'l Ass'n.

Appeal from the United States District Court for the Southern District of Texas.

Before GIBSON, * THORNBERRY and AINSWORTH, Circuit Judges.

AINSWORTH, Circuit Judge:

This important criminal case involves the validity of an indictment charging misapplication of bank funds in connection with a multimillion dollar loan to a bank official at a preferential rate of interest, conditioned on his bank depositing an equal amount in a non-interest bearing account in the lending bank. The district judge dismissed the indictment for numerous reasons which he assigned. We disagree with those reasons and reverse.

I. The Facts

Robert A. Mann, who is Chairman of the Board of Directors and Chief Executive Officer of the First National Bank of Waco, Texas, and Bank of the Southwest, National Association of Houston, Texas, were jointly charged in a one-count indictment with a violation of 18 U.S.C. § 371 by conspiring during the period from December 1969 until February 1972 to knowingly and willfully misapply the monies and funds of the First National Bank of Waco, with intent to injure and defraud said bank by causing the funds to be converted to the use, benefit and advantage of the defendant, Mann, in violation of 18 U.S.C. § 656. Section 656 provides in pertinent part:

Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, national bank or insured bank, . . . embezzles, abstracts, purloins or willfully misapplies any of the moneys, funds or credits of such bank or any moneys, funds, assets or securities intrusted to the custody or care of such bank, or to the custody or care of any such agent, officer, director, employee or receiver, shall be fined not more than $5,000 or imprisoned not more than five years, or both; but if the amount embezzled, abstracted, purloined or misapplied does not exceed $100, he shall be fined not more than $1,000 or imprisoned not more than one year, or both.

In substance, the indictment charged that defendant Mann was to acquire controlling interest in the First National Bank of Waco for the purchase price of approximately $6,900,000, to be financed by a loan in this amount from defendant Bank of the Southwest. The Republic National Bank of Dallas was to participate in the loan to the extent of $2,900,000, leaving $4,000,000 as the amount of the loan to Mann from Bank of the Southwest. The loan was to be at the rate of interest of 3 per cent per annum, notwithstanding the fact that the prime rate of interest charged by Bank of the Southwest at the time was 81/2 per cent. To compensate Bank of the Southwest for extending the loan to Mann at the preferential rate of interest of 3 per cent, Bank of the Southwest was to require Mann to place on deposit with Bank of the Southwest funds of the First National Bank of Waco in an amount commensurate with the principal amount of the loan, i. e., $4,000,000, in a non-interest bearing account until the principal was reduced or paid in full. Thus, according to the indictment, the monies and funds of the First National Bank of Waco were "converted to the use, benefit and advantage of the defendant, Robert A. Mann," and the preferential 3 per cent loan saved Mann approximately $350,000 per year in interest charges.

The indictment further alleged that defendants agreed that if the $4,000,000 principal was reduced but not paid in full, the amount of the non-interest bearing account to be kept by Mann in the Bank of the Southwest would be reduced by an amount commensurate with the reduction in principal. Accordingly, when Mann reduced the principal amount of the loan from $4,000,000 to $3,000,000, the compensating balance of $4,000,000 was also reduced to $3,000,000, and the rate of interest was increased from 3 per cent to 4 per cent, though Bank of Southwest's prime rate at that time was 6 per cent, thus saving Mann $110,000 per year in interest charges.

Finally, the indictment charged that to effect the object of the conspiracy, and in furtherance thereof, certain described overt acts were committed. Since the validity and sufficiency of the indictment are at issue, the full text of the indictment is reproduced in the margin. 1

Both defendants filed motions to dismiss the indictment under Rule 12 of the Federal Rules of Criminal Procedure, and a hearing was held on the motions as provided by Rule 12(b)(4) of said rules. Numerous grounds for dismissal were asserted in these motions, especially that the allegations contained in the indictment did not state an offense in violation of any law of the United States, and further that the indictment should be dismissed because prosecution thereunder was in violation of several provisions of the Constitution, especially the ex post facto clause of Section 9 of Article 1 and the due process clause of the Fifth Amendment. Defendants contended, among other things, that the indictment failed to allege an offense because the bank loan was lawful at the time it was made, that the allegations in the indictment were vague and indefinite, that defendants had been denied due process of law because the prosecution resulted in an ex post facto application of criminal statutes, and that the Government was attempting to regulate private business transactions by criminal prosecution.

At the hearing the district court allowed the defendants to introduce into evidence, over strenuous opposition of the Government, a large volume of documentary evidence, much of which came from the files of the Government. The Government's objection was that defendants were attempting to try the general issues of fact at the summary hearing on the motions to dismiss. The district judge agreed, however, with the contentions of defendants and dismissed the indictment for written reasons which he assigned as follows:

Based upon the evidence that is not in dispute, and those facts which have been stipulated, and the matters of which the Court can take judicial notice, the Court is of the opinion that the indictment must be dismissed for the following reasons and none other.

Firstly, the Defendants have been denied due process of law.

The Defendants have been denied equal protection of the law.

The indictment fails to state an offense on its face.

The indictment is too vague and indefinite to sustain a prosecution.

18 U.S.C. Sec. 656, as applied in this case, is also too vague and indefinite to sustain a criminal prosecution.

This prosecution is precluded because it violates the ex post facto clause of Section Nine of Article One of the United States Constitution.

The indictment should be dismissed because it is an unlawful retroactive application of government policy as it affects this criminal prosecution.

Lastly, the indictment must be dismissed because it is against the public policy of the United States to regulate private business by criminal prosecution as was done in this case. The Court is relying upon the United States of America vs. Jack P. Ensco (sic), No. 73-3990, Fifth Circuit, June 21, 1974.

The Court accepts the Defendants' theory of the law as it applies to the above reasons for dismissing the indictment.

For these reasons and for no others, except those stated above, the Court dismisses the indictment.

This is a FINAL JUDGMENT.

The Government has appealed the dismissal of the indictment under the Criminal Appeals Act, 18 U.S.C. § 3731. At the outset, defendants contend that the appeal is barred by the double jeopardy clause of the Fifth Amendment. They maintain that though the district judge dismissed the indictment, what he actually did in fact was to acquit the defendants upon findings of facts outside the indictment which constituted a defense on the merits. Accordingly, we must initially dispose of that issue prior to any inquiry into the question whether the indictment sufficiently sets forth a violation of a federal criminal statute, or whether defendants have been indicted and prosecuted for unconstitutional reasons requiring dismissal of an otherwise valid indictment.

II. Double Jeopardy

In arguing that the double jeopardy clause prohibits the Government's appeal in this case, defendants rely on United States v. Lewis, 5 Cir., 1974, 492 F.2d 126. In Lewis, the trial court dismissed an indictment after an evidentiary hearing but prior to trial. This Court dismissed the Government's appeal from the district court's ruling and held that "double jeopardy precludes retrial when the district court has ruled in favor of the defendant on facts going to the merits of the case if these facts were adduced at an evidentiary hearing." 492 F.2d at 127. However, the Supreme Court vacated the decision in Lewis, --- U.S. ---, 95 S.Ct. 1671, 44 L.Ed.2d 97 (1975), and remanded the case for consideration in light of the Court's decision in Serfass v. United States, 420 U.S. ---, 95 S.Ct. 1055, 43 L.Ed.2d 265 (1975). Therefore, the principles enunciated in Serfass are controlling on this issue.

The Supreme Court in Serfass reiterated the principle that jeopardy does not attach until the defendant is " 'put to trial before the trier of facts, whether the trier be a jury or a judge.' " 420 U.S. at ---, 95 S.Ct. at 1062, quoting United States v. Jorn, 400 U.S. 470,...

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