Weir v. United States

• Decision Date: 21 October 1937
• Docket Number: No. 6243-6245,6253.,6248-6250,6252,6243-6245
• Citation: 92 F.2d 634
• Parties: WEIR v. UNITED STATES.
• Court: U.S. Court of Appeals — Seventh Circuit

92 F.2d 634 (1937)

WEIR v. UNITED STATES.^*

Nos. 6243-6245, 6248-6250, 6252, 6253.

Circuit Court of Appeals, Seventh Circuit.

October 21, 1937.

U. S. Lesh, James E. Lesh, George M. Barnard, and Raymond L. Walker, all of Indianapolis, Ind., and Charles D. Kelso, of New Albany, Ind., for appellants.

Val Nolan, U. S. Atty., and B. Howard Caughran, and Paul A. Pfister, Asst. U. S. Attys., of Indianapolis, Ind., for the United States.

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

LINDLEY, District Judge.

Appellants seek to reverse convictions upon pleas of guilty to various indictments charging violation of section 592, title 12, U.S.C.A., subsequent to August 23, 1935, by embezzling certain assets of three state banks, of which they were officers or directors, making false entries in the books and in reports of condition of the banks to the Federal Deposit Insurance Corporation, and conspiracy to violate the law. The indictments charged that each bank was a state "nonmember bank" as defined by law, the deposits of which were insured, in accord with the federal law, in the Federal Deposit Insurance Corporation, organized under the laws of the United States, a part of the capital stock of which the United States owned. Appellants' demurrers were overruled. In turn, followed pleas of guilty, judgments of conviction, and the instant appeals.

Appellants contend that section 592 does not apply to offenses committed by officers of state banks which are not members of the Federal Reserve System even though the deposits are insured in the Federal Deposit Insurance Corporation; that if it is applicable to officers and directors of such banks, it is unconstitutional; that if the statute is applicable and Congress has power to enact it, it does not become effective as to nonmember state banks unless the state of Indiana authorizes such banks to insure their deposits under the federal law, and that such consent has not been given.

The pleas of guilty admitted all averments of fact and waived any defect in form of allegations. After such pleas the accused could not question any issue of fact or the propriety of its form of averment, People v. Brown, 140 Cal.App. 616, 36 P.(2d) 194; Miggins v. State, 170 Md. 454, 184 A. 911; Spoo v. State, 219 Wis. 285, 262 N.W. 696; Hudspeth v. State, 188 Ark. 323, 67 S.W.(2d) 191; and waives all defects not jurisdictional. Roberto v. U. S., 60 F.(2d) 774 (C.C.A.7); Kachnic v. U. S., 53 F.(2d) 312, 79 A.L.R. 1366 (C.C. A.9); Spirou v. U. S., 24 F.(2d) 796 (C.C. A.2); Rice v. U. S., 30 F.(2d) 681 (C.C.A. 5); Hocking Valley R. Co. v. U. S., 210 F. 735 (C.C.A.6). Consequently, by the pleas, appellants admitted that the banks in question were "nonmember banks" but that they were insured, participating in the benefits created by the Congress under the Federal Deposit Insurance Corporation Act. The questions submitted, therefore, are wholly legal in character.

Section 592 provides that any officer, director, or agent of any insured bank, as defined in the act, who embezzles any of the assets of such bank or makes any false entry in any of its books or reports, with intent to defraud the Federal Reserve System or the insured bank, or any other company, body politic, corporation, the Federal Deposit Insurance Corporation, or any agent appointed to examine the affairs of such insured banks, and any officer or director who aids or abets such act, shall be punished. The section originally extended to officers of only such banks as were members of the Federal Reserve System, but was amended in 1935 to include the officers of an "insured bank," which, according to subsection (c) (8) of section 264 of the act, is any bank, the deposits of which are insured under the act. The United States is the owner of capital in the Insurance Corporation to the extent of $150,000,000.00. Section 264(d), title 12, U.S.C.A. A state "nonmember bank," is any state bank not a member of the Federal Reserve System. Section 264(c) (2). Subsection (f) of section 264 provides that every bank, not a member of the Federal Reserve System, which on June 30, 1935, was or thereafter became a member of the Temporary Federal Deposit Insurance Fund shall be and continue to be, without application or approval, an insured bank, subject to the provisions of the law. Subsection (f) further provides that upon application any state nonmember bank, upon examination by the corporation and approval by the board of directors, may become an insured bank. Under the averments of the indictments the banks mentioned therein must have complied with the act and become insured nonmember banks.

There is no doubt of the power of Congress to establish the National Banking System, the Federal Reserve Bank System, and institutions in furtherance of the power, such as the Federal Land Banks and Joint Stock Land Banks. McCulloch v. State of Maryland et al., 4 Wheat. 316, 4 L.Ed. 579; Osborn et al. v. President, etc., of the Bank of United States, 9 Wheat. 738, 6 L.Ed. 204; Westfall v. United States, 274 U.S. 256, 47 S.Ct. 629, 71 L.Ed. 1036; Farmers' & Merchants National Bank v. Dearing, 91 U.S. 29, 23 L.Ed. 196; Smith v. Kansas City Title & Trust Co. et al., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577; Norman v. Baltimore, etc., R. Co., 294 U.S. 240, 303, 55 S.Ct. 407, 414, 79 L.Ed. 885, 95 A.L.R. 1352. And the power to inaugurate such systems and to create such institutions carries with it inevitably the power to preserve and protect them. In pursuance of this power of protection and preservation, Congress has created, as an agency of the government, the Federal Deposit Insurance Corporation to promote the soundness of banking and said the government in the discharge of its fiscal transactions. Its obvious intent was, by insuring deposits, to prevent runs on banks by depositors, to preserve solvency of insured banks, and thus to keep open the channels of trade and commercial exchange. Clearly, under the decisions mentioned, the creation of the corporation was within the constitutional power of the government and the act is a proper basis for prosecutions for acts destructive of preservation of the agency thus created. Embezzlement by an officer of any insured state bank tends to end in loss to the Insurance Corporation and, by the same token, to the government itself. It tends to destroy the solvency of the bank, to cause closing thereof and, thus, to block the open channels of commercial exchange essential to the efficient operation of the government's fiscal and financial undertakings.

That Congress rightfully and properly extended criminal liabilities, intended to protect the insurance corporation and to keep the channels of commercial exchange open, to the officers of all insured banks is clear from the language in Westfall v. United States, 274 U.S. 256, 47 S.Ct. 629, 71 L.Ed. 1036, where Mr. Justice Holmes held it constitutional for Congress to extend criminal liabilities to the officers of state banks who were members of the Federal Reserve System, even though chartered by and subject to the laws of the state, saying: "It is not disputed that Rev. Stat. § 5209 12 U.S.C.A. § 592 and note if applicable, punishes the bank manager, and those who aided and abetted him in his crime. Coffin v. United States, 156 U. S. 432, 447, 15 S.Ct. 394, 39 L.Ed. 481. The argument is that Congress has no power to punish offenses against the property rights of state banks. It is said that the statute is so broad that it covers such offenses when they could not result in any loss to the Federal Reserve Banks, and it is suggested that if upheld the Act will invalidate similar statutes of the States. This argument is well answered by Hiatt v. United States, 4 F.(2d) 374, 377 (C.C.A.7). Certiorari denied 268 U.S. 704, 45 S.Ct. 638, 69 L.Ed. 1167. Of course an act may be criminal under the laws of both jurisdictions. United States v. Lanza, 260 U.S. 377, 382, 43 S.Ct. 141, 67 L.Ed. 314. And if a State bank chooses to come into the System created by the United States, the United States may punish acts injurious to the System, although done to a corporation that the State also is entitled to protect. The general proposition is too plain to need more than statement. That there is such a System and that the Reserve Banks are interested in the solvency and financial condition of the members also is too obvious to require a repetition of the careful analysis presented by the Solicitor General. The only suggestion that may deserve a word is that the statute applies indifferently whether there is a loss to the Reserve Banks or not. But every fraud like the one before us weakens the member bank and therefore weakens the System. Moreover, when it is necessary in order to prevent an evil to make the law embrace more than the precise thing to be prevented it may do so. It may punish the forgery and utterance of spurious interstate bills of lading in order to protect the genuine commerce. United States v. Ferger, 250 U.S. 199, 39 S.Ct. 445, 63 L.Ed. 936. See further, Southern Ry. Co. v. United States, 222 U.S. 20, 26, 32 S.Ct. 2, 56 L.Ed. 72. That principle is settled. Finally Congress may employ state corporations with their consent as instrumentalities of the United States, Clallam County v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328, and may make frauds that impair their efficiency crimes. United States v. Walter, 263 U.S. 15, 44 S.Ct. 10, 68 L.Ed....