People v. Wilkin

• Decision Date: 02 September 1936
• Docket Number: Motion No. 444.
• Citation: 268 N.W. 779,276 Mich. 679
• Parties: PEOPLE v. WILKIN et al.
• Court: Michigan Supreme Court

276 Mich. 679

268 N.W. 779

PEOPLE

v.WILKIN et al.

Motion No. 444.

Supreme Court of Michigan.

Sept. 2, 1936.

Herbert R. Wilkin and another were charged by information with conspiring to defraud the state and public as to the financial condition of a bank. From an order granting defendants' motion to quash the information, the People appeal.

Case remanded for trial.Appeal from Circuit Court, Genesee County; Paul V. Gadola, judge.

Argued before the Entire Bench, except POTTER, J.

Andrew J. Transue, Pros. Atty., and Philip Elliott, Asst. Pros. Atty., boty of Flint, for the People.

Edward N. Barnard, of Detroit, for appellee Herbert R. Wilkin.

BUTZEL, Justice.

An information was filed charging Herbert R. Wilkin and James L. Walsh with conspiring ‘to defraud the State of Michigan in the exercise of its * * * fiscal functions by deliberately giving false information to the commissioner of the banking department * * * regarding the financial condition of the Union Industrial Trust & Savings Bank (of Flint), and to deceive the commissioner * * *, the depositors and creditors of the * * * bank, its directors and stockholders * * * and the public as to the financial condition of the * * * bank, and to deceive said persons as to the amount for which said bank was indebted for money borrowed and bills payable and the amount of its deposits, and did feloniously conspire to * * * issue certain certificates of deposit of the * * * bank, for the purpose of borrowing money for said bank and to make false and deceptive entries on the books of the Union Industrial Trust and Savings Bank as to the assets, liabilities and resources of the * * * bank.’

The Union Industrial Trust & Savings Bank of Flint is a state bank and also a member of the Federal Reserve System. Defendant James L. Walsh was vice president and chairman of the operating committee of the Guardian Detroit Union Group, a holding company owning most of the stock in a group of banks, including the Fling bank, the Guardian Detroit Bank of Detroit, and the Highland Park State Bank of Highland Park. He was vice president and director of the Guardian Detroit Bank and also a director of both the Flint and Highland Park banks. Defendant Herbert R. Wilkin was a member of the group operating committee and executive vice president and director of the Flint bank.

On December 30, 1930, the Flint bank owed the Guardian Detroit Bank $1,800,000 for bills payable. The defendants knew, or must have known, that within the next few days the bank statement would be asked, published, and advertised. The correspondence and communications between the two showed that it was their purpose to succeed in showing no bills payable owing on the annual statement of the Flint bank. The defendants, in their official capacities, accomplished this by substituting certificates of deposit in lieu of the bills payable. In order to take up the $1,800,000 of bills payable on December 31, 1930, a certificate of deposit was issued in the sum of $1,200,000 payable to the Guardian Detroit Bank. A deposit slip was prepared which on its face showed that the Flint bank had deposited in the Detroit Bank the sum of $1,200,000. The Highland Park bank deposited $600,000 in the Guardian Detroit Bank for the credit of the Flint bank which, in turn, issued a certificate of deposit payable to the Highland Park bank in the same sum. The $1,800,000 of deposits of the Flint bank in the Detroit Bank and the bills payable in the same sum were canceled, leaving certificates of deposits in the sum of $1,800,000 as a net result of the transaction. These transactions were entered into so that, in the language of defendant Walsh, ‘none of the units of the Guardian Detroit Bank will show $1.00 of bills payable in the statement to be published shortly.’ The $600,000certificate of deposit held by the Highland Park bank issued on December 31, 1930, in accordance with the telephone conversation between the defendants, was evidently only deposited for the date on which the bank statement would be made out, for on January 2, 1931, two days after the issuance of the certificate of deposit, the Highland Park bank was paid out of funds secured by notes which were dated December 31, 1930, and received by the Detroit Bank on that date, but not entered on its books until January 2, 1931. A $200,000 part payment was made on the $1,200,000 certificate of deposit on January 2d, and tends to show that the certificate of deposit was recognized by the various banks, not as a deposit, but as borrowed money. The balance of $1,000,000 of the certificate of deposit remained on the books of the bank until February 10, 1931. Correspondence between the parties indicates that this transaction was conducted solely for the purpose of what defendants euphemistically called ‘window dressing,’ and the prosecution terms a fraud on the banking commissioner, depositors, and public. Printed statements were duly published. The banks were congratulated on the remarkable showing they had made in paying off their bills payable and their financial strength.

On December 31, 1931, a Mr. Strassler, the auditor of the Flint bank, was told by Mr. Wilkin that the Detroit Bank was reducing the notes of the Flint bank payable to the Detroit Bank by $600,000, and that the Flint bank should issue a certificate of deposit for a like amount. On January 2, 1932, Wilkin and Strassler learned that the deposits for $600,000 had not been entered on the books of the Detroit Bank nor had the Flint bank been credited with a payment of $600,000 on its bills payable. On January 8, 1932, the annual bank statement was issued in which this decrease in bills payable of $600,000 and increase of deposits in like amount was included, although the books of the Detroit Bank did not show this change. The prosecution claimed that these transactions were the result of a criminal conspiracy to make false entries and reports and issue certificates of deposit for the purpose of borrowing money. Defendants were bound over by the examining magistrate to trial in the circuit court. In the circuit court defendants moved to quash the information on the ground that the state courts had no jurisdiction inasmuch as the Flint bank was a member of the Federal Reserve Bank and that offenses against a member of the Federal Reserve Bank were cognizable only by the federal courts to the exclusion of the state; another ground for the...