U.S. v. Walker

• Decision Date: 03 April 1989
• Docket Number: 88-5484,Nos. 88-5195,s. 88-5195
• Citation: 871 F.2d 1298
• Parties: UNITED STATES of America, Plaintiff-Appellee (88-5195), Plaintiff-Appellant (88-5484), v. Billy York WALKER, Defendant-Appellant (88-5195), Defendant-Appellee (88-5484).
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1298

871 F.2d 1298

UNITED STATES of America, Plaintiff-Appellee (88-5195) Plaintiff-Appellant (88-5484), v. Billy York WALKER, Defendant-Appellant (88-5195) Defendant-Appellee (88-5484).

Nos. 88-5195, 88-5484.

United States Court of Appeals Sixth Circuit.

Argued Nov. 14, 1988.

Decided April 3, 1989.

W. Hickman Ewing, Jr., U.S. Atty., Frederick H. Godwin, Asst. U.S. Atty. (argued), Memphis, Tenn., for U.S.

James Wilson (argued), Hal Gerber, Memphis, Tenn., for Billy York Walker.

Before NELSON and BOGGS, Circuit Judges, and ENSLEN, District Judge. ^*

ENSLEN, District Judge.

Billy York Walker appeals his conviction following a jury trial on each count of a 28-count indictment alleging violations of various federal banking laws. ¹ Prior to 1985, Mr. Walker was the president and majority shareholder of Farmers Bank located in Dyersburg, Tennessee. Most of the bank's business was agricultural in nature. Mr. Walker was also the owner, president and operator of Walker Grain Company ("Walker Grain"), a grain storage firm, located in the same town.

Count 1 alleges that Walker and his life-long friend, Walter Hastings, conspired to defraud Farmers Bank, to misapply bank funds and to make false entries in bank records in violation of 18 U.S.C. Sec. 371. Walker convinced Hastings to sign two promissory notes, one for $150,000 secured by stock owned by Hastings, and one for $118,000 which was unsecured. The proceeds of both loans were immediately deposited to Walker Grain's account at Farmers Bank. The loan applications did not disclose Walker Grain's interest in the loans. Walker personally approved both loans.

Originally, Hastings called Walker each time an interest payment was due and Walker made the payment using a Walker Grain check. In 1985, Walker started giving checks to Hastings and Hastings made the payments using his own checks. The overt acts in the conspiracy each involve separate interest payments on the two loans. The bank's records on each loan indicate that the loans were for Hastings' benefit and that Hastings made the interest payments. Counts 3-21 allege false entries in bank records based upon the failure of the records to indicate that the loans were not for Hastings' benefit and that he did not make the interest payments from his own funds.

In 1985, the bank's vice president in charge of loans, Larry James, noticed that the Hastings loans were becoming past due. He knew that Walker and Hastings were friends and offered to take the collection of these loans over for Walker, thinking Walker might be uncomfortable handling the accounts himself. Walker assured James that Hastings would repay the loans as soon as Hastings solved some other financial problems. An investigation conducted by the bank, at the suggestion of federal examiners, subsequently revealed Walker's interest in the Hastings loans. When confronted with the matter by bank officials, Walker shook his head and replied, "What can I say?" Thereafter, Walker took an indefinite leave of absence and never returned to the bank.

Walker's defense to counts 1 and 3-21 was that he lacked any intent to defraud the bank. He contends that he approved each loan in the ordinary course of business, based upon Hastings' credit worthiness, character, and reputation, as well as the bank's potential to profit from each loan. He claims that he lacked any intent to deceive the bank, although he admits that he did not tell the bank's board of directors of Walker Grain's interest in the loans. Walker contended that he did not think it necessary to tell the bank's board of directors about Walker Grain Company's interest in the Hastings loans, since the bank was only interested in profitability and since Hastings had the ability to repay the loans. ² Walker testified that Hastings understood his obligation to repay the loans, but understood that the money would come from Walker. Hastings testified that he had no intention of repaying the loans and thought Walker would do so.

Count 2 alleges that Walker, in his capacity as president of Farmers Bank, made a false statement on a Federal Deposit Insurance Corporation ("FDIC") questionnaire. The questionnaire at issue, dated May 25, 1982, asked Walker to: "List all extensions of credit made since last examination for the accommodation of others than those whose names appear on bank's records or on credit instruments in connection with such extension." Walker answered that no such loans had been made. The government charged that this statement was false because it failed to disclose the loans to Hastings which were used for the benefit of Walker Grain.

Count 22 involves a loan made to Mr. Hastings by the Bank of Friendship, located in Friendship, Tennessee, in the amount of $150,000. The president of the Bank of Friendship is John York, Mr. Walker's cousin. Mr. York testified that Walker called him and asked him to make a loan to Walter Hastings. York never spoke to Hastings about the loan. The note showed that the purpose of the loan was for "operating capital." It was repaid by a check drawn on Farmers Bank showing Hastings as the remitter. Hastings testified that he had never been to the Bank of Friendship and had never spoken to York regarding a loan. The government contended that the loan to Hastings was not used as operating capital, but was instead used to make a principal and interest payment on Hastings' $150,000 note at Farmer's Bank. The balance of one of the Hastings notes was increased to repay the Bank of Friendship loan. The government argued that Walker obtained this loan for Hastings under false pretenses, by failing to disclose Walker Grain's interest in the transaction. ³

Counts 23 and 24 relate to a gentleman named Dan Holloway. Mr. Holloway's 1982 financial statement showed a net worth of $100 million dollars and he had deposits in the Farmers Bank totaling up to $1,250,000. Walker owned an option on an 80-acre farm in Dyersburg, Tennessee. He and Holloway decided to develop the farm as a gravel pit. They jointly applied for, and received, a loan for $120,000 from First Tennessee Bank to buy the farm/gravel pit. This note was secured by a deed of trust on the land. Walker and Holloway never earned any profits on the gravel pit. They each paid half of the interest on the loan and of one payment to reduce principal.

When First Tennessee Bank requested a second principal reduction, Walker could not come up with the funds. Holloway agreed to take over the loan in exchange for Walker's interest in the property. At Holloway's request, Walker arranged for Farmers Bank to lend Holloway $122,055.90. Part of the proceeds from the loan went to pay off the First Tennessee loan and part went to cover an overdraft in a checking account held jointly by Walker and Holloway. Walker transferred his interest in the property to Holloway after these transactions were completed.

Count 23 alleges that Walker engaged in a scheme to defraud Farmers Bank by means of false statements to the bank's finance committee. Members of the finance committee testified that, on January 7, 1985, Walker told the committee that the loan to Holloway was well collateralized and/or secured by real estate. The minutes of the meeting contain the following entry:

Dan Holloway, application for loan of $122,000 at FBP for one year, accompanied by financial statements, to payoff farm note at First Tennessee Bank, secured by deed of trust on farm. Approved.

Walker did not disclose his interest in the loan to the finance committee and none of the loan documents disclosed that Walker benefited from the loan. Walker also denied that he benefited from the loan, even though it eliminated his obligation to First Tennessee Bank and an overdraft on a checking account at Farmers Bank.

Count 24 alleges that Walker caused a false entry to be made in bank records--specifically the minutes of the January 7, 1985 finance committee meeting--since those minutes imply that the note to Holloway was secured by a deed of trust on the farm when, in fact, the loan from Farmers Bank was unsecured. Walker argued that the minute entry is not false, since the reference to a deed of trust refers to the First Tennessee Bank loan, not to the loan from Farmers Bank. In addition, the note itself and the loan documents all indicated on their face that the Farmers Bank loan was unsecured. Walker argued that he did not receive a benefit from the loan to Holloway, since he had already relinquished his interest in the gravel pit.

Count 25 alleges a false entry in the form of a false endorsement Walker caused another bank employee, Mabel Paschal, to make on a cashier's check. Walker drew a check for $54,747.51 on Walker Grain's checking account, made payable to Henry Simon. Walker gave Paschal the Walker Grain/Henry Simon check and directed her to make out a cashier's check to Holloway in the amount of $47,770.02, which she did. Walker then told her to give him the difference in cash. Paschal complied, and then noticed that the Simon check was not endorsed. She testified that Walker told her to sign it. When she refused, he instructed her to stamp the back of the check with a stamp reading "Credit to the account of the within named payee. Absence of endorsement guaranteed, Farmers Bank, Dyersburg, TN."

Walker denied telling Paschal to endorse the check or to stamp it. He argued that, since the check was drawn on the Walker Grain account, it did not need an endorsement and this was not unusual. Walker admitted that Henry Simon did not exist, and explained his use of a false name by saying that he did not want Holloway to become embroiled in his difficulties with the FDIC. The government contends that the cash was given to Holloway to make one half of an interest payment due on the $122,055.90 loan to Holloway. Holloway made this interest payment, with a check drawn on his business account, on the same day as the cashier's check transactions occurred.

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