U.S. v. Arthur, 74-2276

• Decision Date: 04 November 1976
• Docket Number: No. 74-2276,74-2276
• Citation: 544 F.2d 730
• Parties: UNITED STATES of America, Appellee, v. Keith L. ARTHUR, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 730

544 F.2d 730

UNITED STATES of America, Appellee, v. Keith L. ARTHUR, Appellant.

No. 74-2276.

United States Court of Appeals Fourth Circuit.

Argued June 11, 1976.

Decided Nov. 4, 1976.

Dennis W. Dohnal, Richmond, Va. (Murray J. Janus, Bremner, Byrne, Baber & Janus, Richmond, Va., R. R. Fredeking, II, Charleston, W. Va., on brief), for appellant.

Frank E. Jolliffe, Asst. U. S. Atty., Charleston, W. Va. (John A. Field, III, U. S. Atty., Charleston, W. Va., on brief), for appellee.

Before CRAVEN and RUSSELL, Circuit Judges, and KUNZIG, Judge, United States Court of Claims. ^*

DONALD RUSSELL, Circuit Judge:

The appellant Keith L. Arthur was convicted, after a jury trial, on nine counts of an eighteen-count indictment alleging misapplication of bank funds in violation of 18 U.S.C. § 656. ¹ He was sentenced to concurrent terms of imprisonment, the longest being three years, and fined a total of $12,000.

He appeals, contending that various of the trial court's instructions were erroneous, that the trial court improperly ascertained the nature of the jury's disagreement when it appeared to be deadlocked that a subsequent supplemental charge was erroneous in that it repeated some but not all of the original instructions, and that the admission of certain testimony relating to alleged bribery and illegal political contributions by appellant was error.

We reverse and remand for a new trial.

I

Appellant was the President, a member of the Board of Directors and a major shareholder of the Valley National Bank of Huntington, West Virginia, a federally insured institution. His primary responsibilities as a bank officer were to attract new business and to maintain satisfactory public relations.

The government's evidence established that on eighteen occasions during the period from October, 1970, through September, 1973, appellant received funds from an account which apparently contained the bank's profit from the sale of credit life insurance in connection with its loan operations. ² Each of these occasions formed the basis of one count of the indictment. Appellant testified that he used the money so obtained to entertain, do favors and buy gifts for state and party officials who might be influential in securing government deposits for the bank. ³

The government's position is that appellant's testimony, if believed, discloses the use of bank funds to pay unlawful bribes and to make illegal political contributions ⁴ and that such use constituted a misapplication of those funds in violation of 18 U.S.C. § 656. ⁵ Appellant, on the other hand, contends that he used the funds only for legitimate business expenditures for the purpose of creating and maintaining goodwill toward the bank among potential customers and persons who might be influential with potential customers.

II

After instructing the jury that paying bribes and making illegal political contributions with bank money constitute a misapplication of that money, the district court instructed that

the payment of money to government officials for the purpose of obtaining deposits of government funds in the bank and to influence the judgment of such officials in connection with such deposits is, in itself, illegal in that such activity constitutes the bribery or attempted bribery of public officials. ⁶

The use of bank funds for the illegal purposes of bribing state officials or making unlawful political contributions constitutes a misapplication of those funds within the meaning of 18 U.S.C. § 656 regardless of any anticipated benefit to the bank, United States v. Caldwell, (4th Cir. 1976) 544 F.2d 691 . There was evidence at trial from which a jury, if properly instructed, might have found that appellant had used bank funds for such purposes. Therefore, contrary to appellant's contention, it was proper to instruct the jury as to bribery and illegal contributions. However, the district court's instruction on bribery, as set forth above, was erroneous in that if failed to adequately distinguish conduct which amounts to bribery from conduct which is legally innocent. Cf., United States v. Brewster (1974) 165 U.S.App.D.C. 1, 506 F.2d 62, 78-79, 83.

Not every gift, favor or contribution to a government or political official constitutes bribery. It is universally recognized that bribery occurs only if the gift is coupled with a particular criminal intent, e. g. United States v. Brewster, supra; Neely v. United States (9th Cir. 1960) 274 F.2d 389; United States v. Labovitz (3rd Cir. 1958) 251 F.2d 393; State v. Brewer, 258 N.C. 533, 129 S.E.2d 262, appeal dismissed, 375 U.S. 9, 84 S.Ct. 72, 11 L.Ed.2d 40 (1963); People v. Lyons, 4 Ill.2d 396, 122 N.E.2d 809 (1954); People v. Johnston, 328 Mich. 213, 43 N.W.2d 334 (1950). That intent is not supplied merely by the fact that the gift was motivated by some generalized hope or expectation of ultimate benefit on the part of the donor, see United States v. Brewster, supra (dealing with campaign contributions) and Dukehart-Hughes Tractor & Equipment Co. v. United States (1965) 341 F.2d 613, 169 Ct.Cl. 522 (tax case holding, inter alia, that "goodwill" gifts and favors to government officials did not contravene Iowa bribery statute). "Bribery" imports the notion of some more or less specific quid pro quo for which the gift or contribution is offered or accepted. See, e. g., United States v. Brewster, supra, at 81:

No politician who knows the identity and business interests of his campaign contributors is ever completely devoid of knowledge as to the inspiration behind the donation. There must be more specific knowledge of a definite official act for which the contributor intends to compensate before an official's action crosses the line between guilt and innocence.

This requirement of criminal intent would, of course, be satisfied if the jury were to find a "course of conduct of favors and gifts flowing" to a public official in exchange for a pattern of official actions favorable to the donor even though no particular gift or favor is directly connected to any particular official act. United States v. Baggett (4th Cir. 1973) 481 F.2d 114, cert. denied 414 U.S. 1116, 94 S.Ct. 850, 38 L.Ed.2d 744 (1973) (Travel Act ⁷ prosecution involving alleged bribery of Maryland County Commissioner). Moreover, as the Seventh Circuit has held, it is sufficient that the gift is made on the condition "that the offeree act favorably to the offeror when necessary." United States v. Isaacs (7th Cir. 1974) 493 F.2d 1124, 1145, cert. denied 417 U.S. 976, 94 S.Ct. 3183, 41 L.Ed.2d 1146 (1974) (construing Illinois statute in a Travel Act prosecution). It does not follow, however, that the traditional business practice of promoting a favorable business climate by entertaining and doing favors for potential customers becomes bribery merely because the potential customer is the government. Such expenditures, although inspired by the hope of greater government business, are not intended as a quid pro quo for that business: they are in no way conditioned upon the performance of an official act or pattern of acts or upon the recipient's express or implied agreement to act favorably to the donor when necessary. See Dukehart-Hughes Tractor & Equipment Co. v. Hughes, supra, at 615-616.

As the alleged bribees in this case were West Virginia government and party officials, the most relevant definition of bribery is that of West Va. Code Ann. § 61-5A-3 (Supp.1975) which, reduced to essentials, provides that bribery is the payment or acceptance of "(a)ny pecuniary benefit as consideration for the recipient's official action as a public servant or party official . . ." (Emphasis added). While the West Virginia courts do not appear to have considered the point, it is reasonably certain that this statute was not intended to depart from the general rule as to the requisite criminal intent discussed above. Indeed, the use of the contractual term "consideration" indicates that the benefit must be given in exchange or as compensation for official action and not merely as an unconditional gift with the hope that a favorable business climate will result in order to be classified as bribery. ⁸

The crucial distinction between "goodwill" expenditures and bribery is, then, the existence or nonexistence of criminal intent that the benefit be received by the official as a quid pro quo for some official act, pattern of acts, or agreement to act favorably to the donor when necessary. In instructing on bribery, the District Court in this case was obliged to set forth that distinction with sufficient clarity to enable the jury to determine the legality of appellant's expenditures, United States v. Brewster, supra, at 83. This was not accomplished by the instruction that "payment of money to Government officials for the purpose of obtaining deposits of government funds in the bank and to influence the judgment of such officials in connection with such deposits . . . constitutes . . . bribery . . . ." If "influence" is given its broadest common meaning, it is clear that "goodwill" gifts and favors to and entertainment of government officials are intended to influence the judgment of such officials. That is, such expenditures are made with the hope that the officials will be more likely to award government business to the donor if a favorable business climate is created than if such a climate is not established. But, as is apparent from the discussion above, this type of influence does not amount to bribery.

This defect was not cured by the Court's subsequent instruction that the Internal Revenue Code "recognizes that a business such as a bank may incur legitimate business expenditures for ordinary and necessary business purposes to create a favorable business climate and to promote its relationship with present and potential customers." Even if the jury understood this to mean that "goodwill" expenditures are not bribery, the instruction did not explain how to...