U.S. v. Cooper

• Decision Date: 08 June 1978
• Docket Number: Nos. 77-5212,77-5213,s. 77-5212
• Citation: 577 F.2d 1079
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: 3 Fed. R. Evid. Serv. 969 UNITED STATES of America, Plaintiff-Appellee, v. Joseph G. COOPER, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Elton E. LARKIN, Jr., Defendant-Appellant.

Page 1079

577 F.2d 1079

3 Fed. R. Evid. Serv. 969

UNITED STATES of America, Plaintiff-Appellee, v. Joseph G. COOPER, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Elton E. LARKIN, Jr., Defendant-Appellant.

Nos. 77-5212, 77-5213.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 1, 1977.

Decided June 8, 1978.

Phillip E. Kuhn, Finley, Stein & Kuhn, Memphis, Tenn., for Joseph G. cooper.

Ronald D. Krelstein, Gerber, Bernstein, Gerber & Winestone, Memphis, Tenn., for Elton E. Larkin, Jr.

W. J. Michael Cody, U. S. Atty., Arthur S. Kahn, John J. Mulrooney, Asst. U. S. Attys., Memphis, Tenn., for the U. S.

Before ENGEL and KEITH, Circuit Judges and MARKEY, Chief Judge. ^*

ENGEL, Circuit Judge.

Appellants Elton E. Larkin, Jr. and Joseph G. Cooper were convicted of conspiring to misapply the funds of the National Bank of Commerce in Memphis, Tennessee, in violation of 18 U.S.C. § 656 (1976). ¹ Larkin was lending officer for the bank and Cooper was the ultimately unsuccessful candidate for his party's nomination for election to Congress. The scheme alleged in the indictment involved means of circumventing both bank policy and the bank's express The testimony at the trial showed that the bank had a written policy whereby all unsecured loans of $4,000 or more had to be supported by a current financial statement. In addition, any loans in excess of $10,000 had to be approved by a loan committee, and could not be made by a loan officer individually. The responsibility for referring loans to the committee rested with the loan officer. The limitation of $10,000 which a loan officer might extend, acting alone, applied to the aggregate debt of any individual. The evidence showed that while representing to the other officers that Cooper had no account at the bank, Larkin was at the same time approving substantial overdrafts on checking accounts which Cooper continued to maintain at the bank. It also showed that Larkin and Cooper took great pains to keep the outstanding balance at any time due on Cooper's individual accounts below the $10,000 amount, presumably so that it would not be discovered. The most substantial misapplication of funds occurred, however, in a series of thirteen loans to persons other than Cooper but for the benefit of his individual account and of his account as a political candidate. In each instance third parties purportedly applied for loans and the checks issued by the bank were then endorsed to Cooper or the proceeds were given to him and deposited in his accounts. Each of these loans was approved by Larkin. Although several of the loans were in excess of $4,000, only one was supported by a financial statement which appeared in the named borrower's loan file. With respect to one borrower, Paul Kelley, Larkin approved a loan of $6,144.66, although Kelley had never had previous dealings with the bank and had not submitted a financial statement. In fact, Kelley and Larkin never had any contact, and Cooper acted as an intermediary between Kelley and Larkin in arranging the loan. An additional loan of $3,793.32 was also made to Kelley and approved by Larkin under the same circumstances. The proofs also showed that Cooper advised Kelley at the time that he would repay the loans. On another occasion, a loan of $3,533.70 was made to Theresa Kaplan, Cooper's nineteen-year-old baby sitter. Miss Kaplan testified that she was unaware that she was taking out the loan in her own name and simply thought that she was co-signing a note; Cooper reassured her at the time that he would repay the note himself. Miss Kaplan actually signed the note in Cooper's apartment and was advanced the monies without filling out a loan application. She never, in fact, met with Larkin or provided the bank with information concerning her financial condition; her only act was to fill in and to sign the note. The proofs showed that the date of birth which she had written on the note had been altered to reflect an age of twenty-nine, rather than her actual age of nineteen.

directions in order to funnel money to Cooper, whose shaky financial condition had prompted other bank officers to cut him off from receiving any further loans and even to prevent his maintaining a checking account at the bank.

Finally, Cooper's former wife, Barbara Ivy, borrowed $3,000 in her own name on Cooper's instructions and then turned the proceeds over to Larkin. ² Mrs. Ivy testified that Larkin agreed personally to satisfy the debt, which he later did.

THE INSTRUCTIONS

The defendants raise several objections to the instructions to the jury, claiming Although the misapplication statute no longer explicitly requires an intent to injure or defraud the bank, ³ cases consistently hold it to be an element of the crime. E. g., Logsdon v. United States, 253 F.2d 12 (6th Cir. 1958); United States v. Tidwell, 559 F.2d 262, 265-66 & n.2 (5th Cir. 1977), denied ---- U.S. ----, 98 S.Ct. 1520, 55 L.Ed.2d 538 (1978). Because the term "misapplies" is not specifically defined in the statute and because in common understanding it has a somewhat different connotation from that of fraud generally, the courts have had difficulty agreeing upon an adequate jury instruction covering the offense, especially with respect to the nature of the culpability required for a violation.

that they presented an inaccurate version of the law of misapplication.

With respect to the intent, the defendants particularly object to the following instruction given by the district court:

An intent to injure or defraud a bank exists if a person acts knowingly, and if the actual result of his conduct would be to injure or defraud the bank even though this may not have been his motive. (Emphasis added.)

Both defendants claim that the above language allowed the government to satisfy its burden to prove intent by creating a presumption of intent which arises from proof of an act. ⁴

A substantially similar instruction was approved by the First Circuit in Golden v. United States, 318 F.2d 357 (1st Cir. 1963). ⁵ Another circuit, however, has rejected it. In United States v. Arthur, 544 F.2d 730, 736-37 (4th Cir. 1976), the Fourth Circuit disapproved a nearly identical charge. See also United States v. Caldwell, 544 F.2d 691, 696 (4th Cir. 1976).

The difficulty, as pointed out both in Arthur and Caldwell, is that the challenged instruction would appear to require rather than merely to permit a jury inference of intent from a finding that the natural result of the conduct was to injure or defraud. In so doing, it is argued, the defense was effectively precluded from convincing the jury that the defendant, in fact, lacked the requisite intent even though the natural result of the conduct may have been to injure or defraud. ⁶

While our circuit has not yet been required to pass upon the express language of the instruction given here, it has recognized that a jury may permissibly infer an intent to injure from the fact of injury, if such injury is a natural result of an act of the defendant. See Logsdon v. United States, supra, 253 F.2d at 15. In Galbreath v. United States, 257 F. 648 (6th Cir. 1918), our court, while holding that it was for the jury to determine whether the intent existed under the evidence, observed:

An intent to injure or defraud, as contemplated by the statute, is not inconsistent Id. at 656.

with a desire for the ultimate success and welfare of the bank. It may, within the meaning of the law, result from an unlawful act voluntarily done, the natural tendency of which may have been to injure the bank. A wrongful misapplication of funds, even if made in the hope or belief that the bank's welfare would ultimately be promoted, is none the less a violation of the statute, if the necessary effect is or may be to injure or defraud the bank.

In a recent Fifth Circuit decision, United States v. Tidwell, supra, the following instruction was expressly approved:

It is reasonable to infer that a person ordinarily intends the natural and probable consequences of his knowing acts. The jury may but is not required to draw the inference and find that the accused intended all of the consequences which one standing in like circumstances and possessing like knowledge should reasonably have expected to result from any intentional act or conscious omission. Any such inference drawn is entitled to be considered by the jury in determining whether or not the Government has proved beyond a reasonable doubt that the defendant possessed the requisite criminal intent.

559 F.2d at 264.

We find the foregoing instruction distinctly preferable to that given by the court in this case. At the same time, however, we do not find the trial judge's instruction here, considered in the context of the evidence and with the other careful instructions given, to be so prejudicial as to affect the substantial rights of the defendant and require reversal. ⁷

In addition to the instruction on intent, the trial court carefully instructed the jury on the burden of proof and presumption of innocence and explained with particularity the elements of the substantive offense. The court informed the jury that negligent banking practices themselves would not amount to misapplication under the statute and further instructed that misapplication was a specific intent crime:

To act with intent to defraud means to act wilfully and with the specific intent to deceive or cheat, ordinarily for the purpose of either causing some financial loss to another, or bringing about some financial gain to ones (sic) self. However, the evidence in the case need not establish that the bank was actually defrauded, but only that the accused conspirator acted with intent to defraud.

Cooper objects to that portion of the trial judge's instructions which stated that "acts knowingly done with a reckless disregard for the interests of the bank may justify a finding of intent to defraud or injure the bank." The instruction...