U.S. v. Arthur, 78-5098

• Decision Date: 03 August 1979
• Docket Number: No. 78-5098,78-5098
• Parties: UNITED STATES of America, Appellee, v. Keith L. ARTHUR, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 660

602 F.2d 660

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

No. 78-5098.

United States Court of Appeals Fourth Circuit.

Argued May 11, 1979.

Decided Aug. 3, 1979.

Dennis W. Dohnal, Richmond, Va. (Bremner, Baber & Janus, Richmond, Va., on brief), for appellant.

E. Leslie Hoffman, III, Asst. U. S. Atty., Charleston, W.Va. (Robert B. King, U. S. Atty., and Wayne A. Rich, Jr., Asst. U. S. Atty., Charleston, W.Va., on brief), for appellee.

Before WINTER, BUTZNER and PHILLIPS, Circuit Judges.

WINTER, Circuit Judge:

As a result of his second trial, defendant was convicted on ten counts of misapplication of bank funds in violation of 18 U.S.C. § 656. His initial conviction on these same charges was reversed by us because of improper jury instructions in United States v. Arthur, 544 F.2d 730 (4 Cir. 1976) (Arthur I ), and we affirmed the district court's rejection of defendant's claim of double jeopardy when the government elected to try him anew. United States v. Arthur, 565 F.2d 159 (4 Cir. 1977) (unpublished) (Arthur II ).

Defendant attacks the validity of his second conviction on the grounds that (1) the evidence was legally insufficient to show that in his misapplication of bank funds he intended to injure the bank, and (2) the district court committed reversible error in admitting his testimony at his first trial into evidence at the second. Defendant also contends that the district court abused its discretion when it prescribed as a condition of probation that he accept full-time employment without salary at any charitable organization in the State of West Virginia approved by the probation department and the district court for a period of two years.

We are not persuaded by any of defendant's arguments. We affirm.

I.

The theory of the government's case and much of the evidence is set forth in our opinion in Arthur I. Briefly stated, the government adduced evidence that defendant was president and a director of the Valley National Bank (Valley), in Huntington, West Virginia. He also served as county clerk, an elected position which he had occupied for seventeen years. The evidence showed that defendant drew money on at least ten separate occasions from a "Borrowers' Life Insurance Account" at Valley for purposes of increasing "goodwill" toward Valley. This account held funds which Valley had earned as commissions on life insurance policies sold in connection with loans. Defendant used funds from this account to pay favors to various people, in particular Assistant State Treasurer RyKoskey. RyKoskey made day-to-day decisions on depositing West Virginia treasury funds, and defendant gave him various gifts to induce him to deposit state funds at Valley. These favors included gifts of $120 worth of postage stamps to enable RyKoskey to make political mailings, paying RyKoskey's expenses at a golf outing, and the like. RyKoskey's favors totaled about $1,000. The effort evidently paid off, since RyKoskey maintained a noninterest-bearing account for the state at Valley that often amounted to $700,000. Occasionally, when defendant found that Valley's reserves were tight and in need of a large deposit, he would call RyKoskey, who would oblige him by transferring some state funds from another bank to the state's account in Valley. In addition, defendant made political gifts to other local political figures from the Borrowers' Account in the total amount of about $600.

Defendant testified at his first trial, and at his second trial the government made known its intention to offer into evidence and read to the jury the transcript of defendant's testimony at the first trial, deleting only testimony which related to the eight counts on which defendant had been acquitted. Defendant objected to this use of his prior testimony on a number of substantive grounds. In a hearing outside the presence of the jury, the district court overruled these objections, but it raised a question as to whether defendant's prior testimony had been given with knowledge that he was not required to testify or to make any statement for or against himself. When defense counsel declined to stipulate the point, the district court called defendant as a witness; and when defendant testified that he could not recall whether he had been advised that he had a right not to testify, and the district court indicated that it would not admit his prior testimony unless the government called defendant's prior counsel as witnesses and interrogated them as to the advice that they had given the defendant, the government called the lawyers as witnesses. Although both attorneys invoked the attorney-client privilege and defendant declined to waive the privilege, the district court required both lawyers to answer. They both testified that they had advised defendant with respect to his right not to testify, whereupon the district court permitted the edited transcript of defendant's prior testimony to be read to the jury.

II.

It is settled that an essential element of misapplication of bank funds in violation of § 656 is the intent to injure or defraud the bank. See Arthur I, 544 F.2d at 736. Defendant concedes that the jury was properly instructed on this point, but he contends that there was not legally sufficient evidence to support a finding of such intent and therefore the district court should have granted his motions for judgment of acquittal. Specifically, defendant relies upon the holding in Arthur I that § 656 required an intent to inflict pecuniary injury, not merely injury to reputation or community standing, and he asserts that the evidence establishes that his intent in making disbursements from the Borrowers' Life Insurance Account was to increase goodwill to Valley and to bring it pecuniary benefit.

We reject this contention. It is answered completely by United States v. Caldwell, 544 F.2d 691 (4 Cir. 1976). There, in rejecting the contention that evidence of a similar scheme of payments and gifts to public officials failed to show intent to injure the bank because in fact the purpose of the scheme was to benefit the bank, we said:

The defendant's wrongdoing was complete at the time when he made illegal payments in accommodations and services to Kelly and RyKoskey and their wives; at that point, defendant had misapplied bank funds by using the money for an illegal purpose. Such misapplication injured the bank, and as such gave rise to the inference that the defendant had the requisite intent. . . .

The fact that the defendant had as his ultimate goal the unlawful preferment of the bank by Kelly and RyKoskey is irrelevant. Uniformly it is held that the promise or hope of a better life to come for the bank does not render lawful that which was unlawful . . .. Nor is it essential to a conviction that the proof show an intent permanently to deprive the bank of its property.

Id. at 696-97.

In deciding defendant's first appeal, we did not depart from Caldwell. In Arthur I Judge Russell, writing for the court, was careful to note that, unlike Arthur I where the conviction was reversed, "the issue in Caldwell was not the adequacy of the trial court's instructions but the legal sufficiency . . . of the evidence." 544 F.2d at 736 n.10. Thus, read together, Caldwell and Arthur I stand for the proposition that a jury in a § 656 prosecution must be properly instructed that intent to inflict pecuniary injury to the bank is an essential element of the offense, but that a jury may properly find that such intent existed when the proof shows the expenditure of bank funds to bribe public officials. By this test, the proof in the instant case was legally sufficient to support a...