United States v. Matsinger, 14913.

• Decision Date: 14 August 1950
• Docket Number: No. 14913.,14913.
• Citation: 92 F. Supp. 516
• Parties: UNITED STATES v. MATSINGER.
• Court: U.S. District Court — Eastern District of Pennsylvania

92 F. Supp. 516

UNITED STATES v. MATSINGER.

No. 14913.

United States District Court E. D. Pennsylvania.

August 14, 1950.

Gerald A. Gleeson, U. S. Atty., Thomas J. Curtin, Asst. U. S. Atty., Philadelphia, Pa., for plaintiff.

John M. Smith, Jr., Philadelphia, Pa., for defendant.

GRIM, District Judge.

The defendant has been convicted under an Act of Congress, 12 U.S.C.A. 592 1948 Revised Criminal Code, 18 U.S.C.A. § 656, which is: "Any officer * * * of any insured bank * * * who * * * willfully misapplies any of the moneys, funds, or credits of such * * * bank * * * with intent in any case to injure or defraud such * * * bank * * * shall be guilty of a misdemeanor * * *"

Since the verdict of the jury was against the defendant, the facts may be stated as follows: Starting in September, 1946, and continuing to February 26, 1947, Samuel S. Backer¹ and Chester Opp obtained money from the Lafayette Trust Company² in Easton, Pennsylvania, by check kiting which was practiced as follows: Opp had a checking account in the Bethlehem National Bank in Bethlehem, Pennsylvania, which is about 12 miles from Easton. Backer had a checking account in the Lafayette Trust Company. Almost daily during the check kiting period, Opp gave checks in large denominations to Backer payable to Backer drawn on Opp's account in the Bethlehem National Bank, which checks were either cashed at the Lafayette Trust Company by Backer or deposited by him in his account therein. In almost every case the funds in Opp's account in the Bethlehem National Bank were insufficient to pay the checks which Opp gave to Backer, but it took three or four days for the checks to clear and to go to the Bethlehem National Bank, which gave Backer and Opp time to raise money to deposit in Opp's account in the Bethlehem National Bank to make the checks good before they arrived at the Bethlehem National Bank. In most cases the money, which was deposited in the Bethlehem National Bank to make the checks good, was raised by cashing other checks at the Lafayette Trust Company, drawn by Opp on his account at the Bethlehem National Bank and payable to Backer. These checks in turn were made good before they cleared by cashing additional checks at the Lafayette Trust Company. Since Bethlehem is only 12 miles from Easton, it took very little time to take the cash from Easton to Bethlehem to make good the Bethlehem checks before they arrived in Bethlehem. The check kiting was made possible by the fact that it took three or four days for the checks to clear from Easton to Bethlehem, while it took only a few minutes to carry the currency obtained from newly cashed checks from Easton to Bethlehem. By a continuous manipulation of checks in this manner all the Opp checks were made good until February 26, 1947, when the kiting got out of control and Opp's checks, then in course of clearance, were returned to the Lafayette Trust Company because of insufficient funds in the Opp account to pay them. The loss to the Lafayette Trust Company in the transactions amounted to some $50,000. It, however, has been reimbursed in full by Backer and by the bank's bonding company. The face value of the checks, which were used in the transactions, totalled approximately $1,400,000.

The defendant was the executive vice-president of the Lafayette Trust Company. The president was only a part time employee and spent little time in the bank. As executive vice-president, the defendant had the authority to, and did, determine what checks should be cashed by the bank. In no case did the defendant cash any of the checks himself, but he permitted the checks to be cashed by bank employees who served under him, although on a number of occasions³ during the check kiting period he was informed⁴ of the check kiting, and he knew when the checks were cashed that there were insufficient funds in the Opp account in the Bethlehem National Bank to pay them.⁵ There is no evidence that the defendant benefited from the check kiting, nor is there any evidence that he was promised any benefit. He was given Christmas gifts by Backer, but so...