# Petition for Writ of Certiorari — Pollard v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_0155%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1975 - **Citation:** 420 U.S. 962 ## Text — torre eer er ee RE ee Seer es ee we ~ReME COURT, Lh & filFD 1 MICHAEL RUUAK, JR., CLE r RK cxsmaall IN THE. SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1974 no. @47619 4 H. CALLOWAY POLLARD, JR., Petitioner, VS. UNITED STATES OF AMERICA, Respondent PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT Jack W. FLoyp Eric P. HANDLER Smith, Moore, Smith, Schell & Hunter Drawer G, Greensboro, N. C. Attorneys for Petitioner, H. Caltoway Poiiard, Jr. INDEX Authorities Cited Citation to Opinions Below Jurisdiction Questions Presented Constitutional Provisions and Statutes Involved Statement of Case Reasons for Granting the Writ 1. The writ should be granted to prevent the sub- version of the function of the grand jury and to prohibit the transformation of the grand jury’s subpoena into a secret and illegal administrative subpoena in the hands of the FBI 2. There currently exists a clear conflict among the circuits as to whether willful misapplication under 18 U.S.C. $656 has ceased, since the deci- sion in United Staies v. Britton, to be a generic offense which cannot be sufficiently charged by an indictment using the statutory language alone 3. The writ should be granted because the decision below creates a direct conflict among the cir- cuits as to the elements which constitute the offense of misapplication and expands that offense far beyond the intent of Congress 4. The writ should be granted to resolve the con- flict between the policy of grand jury secrecy and an individual’s right to be tried only upon the indictment of the grand jury Conclusion Page — - ohwhd Nv — 13 16 19 Appendix A—Opinions and Orders Opinion of the United States Court of Appeals for the Fourth Circuit Order of the United States Court of Appeais for the Fourth Circuit denying petition for rehearing Order of the United States Court of Apneals staying mandate pending petition for writ of cert‘orari Order of the United States District Court for the Middle District of North Carolina denying Motion to dismiss the indictment Appendix B—Text of Constitutional Provisions, Statutes and Rules Involved Constitutional Provisions Statutes Rules AUTHORITIES CITED Dennis v. United States, 384 U.S. 855 (1966) Durbin v. United States, 221 F.2d 520 (D.C. Cir. 1954 Hargreaves v. United States, 75 F.2d 68 (9th Cir. ) cert. denied, 295 U.S. 759 (1935) In re Dionisio, 442 F.2d 276 (7th Cir. 1971) rev'd sub nom. United States v. Dionisio, 410 U.S. 1 (1973) . In re September, 197] Grand Jury, 454 F.2d 580 (7th Cir. 1971) rev'd sub nom, United States v. Mara, 410 U.S. 19 (1973) Johnson v. United States, 95 F.2d 813 (4th Cir. _ 1938) Pe. Iman v. United States, 347 U.S. 7 (1918) ii Page 2a 3a 4a Ib Ib lb 2b 19 12 14 id 10 14, 15 11 Page Russell v. United States, 369 U.S. 749 (1962) 15, 19, 29, 21 Sparks v. Union Trust Company of Shelby, 256 N.C. 478, 124 S.E.2d 365 (1962) 9 Stirone v. United States, 361 U.S. 212 (1960) 19, 20, 21 United States v. American Stevedores, 16 F.R.D. 164 (S.D.N.Y. 1954) 12 United State. v. Archambault, 441 F.2d 281 (9th Cir.) cert. denied, 404 U.S. 843 (1971) 14 United States v. Beard, 436 F.2d 1084 (Sth Cir. 1971) 20 United States v. Bearden, 423 F.2d 805 (Sth Cir.) cert. denied, 400 U.S. 836 (1970) 14 United States v. Britton, 107 U.S. 655 (1883) 3, 13, 14, 15, 16, 18 United States v. Bryan, 483 F.2d 88 (3rd Cir. 1972) yon . 20 United States v. Docherty, 468 F. 2d 989 (2nd Cir. 1972) 16 United States v. Fortunato, 402 F.2d 79 (2nd Cir.) cert. denied, 394 U.S. 933 (1969) 14 United States v. Gens, 493 F.2d 216 (Ist Cir. 1974) 14, 15, 16 United States v. Giordano, 489 F.2d 327 (2nd Cir. 1973) . 16 United States v. Johns-Manville Corporation, 213 F. Supp. 65 (E.D.Pa. 1962) 12 United States v. Kernodle, 357 F. Supp. 844 (M.D.N.C. 1973) ee. United States v. Moraites, 456 F.2d 435 (3rd Ce. ) cert. denied, 409 U.S. 819 (1972) 14 United States v. Mulloney, 79 F.2d 566 (1st Cir. 1935) a 16 iil Page United States v. Nixon, —U.S.—, 41 L.Ed.2d 1039, 94 S.Ct.—(1974) il United States v. Quinn, 365 F.2d 25€ (7th Cir. 1968) 14 United States v. Silverman, 430 F.2d 106 (2nd Cir. i97C) Pais 20 CONSTITUTIONAL PROVISIONS United States Constitution, Amend. V 19, 1b United States Constitution, Amend. VI 15, 19, 22, 1b STATUTES 18 U.S.C. $371 4 18 U.S.C. $656 3, 4, 5, 17, 18, 22, 1b 28 U.S.C. $1254 (1) ; 2 RULES Federal Rules of Criminal Procedure: Rule 6(e) 19, 20, 22, 2b Rule 7(c) 206, 21, 22, 3b Rule 17(a), (c) 9, 4b OTHER AUTHORITIES Note, Government Access to Bank Records, 83 YALE L.J. 1439 (June, 1974) 10, 11 iv IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1974 NO. H. CALLOWAY POLLARD, JR., Petitioner, VS. UNITED STATES OF AMERICA, Respondent PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT To the Honorable Chief Justice and Associate Justices of the Supreme Court of the United States: The petitioner, H. Calloway Pollard, Jr., respectfully prays that a writ of certiorari issue to review the judgment of the United States Court of Appeals for the Fourth Cir- cuit entered on September 23, 1974. CITATION TO OPINIONS The per curiam opinion of the United States Court of Appeals for the Fourth Circuit, which was filed on Sep- tember 23, 1974 but has not yet been officially reported as of the date of filing of this petition, is reproduced in Appendix A to this petition (Appendix A, p. la). The opinion, by Ward, J., of the United States District Court I 2 for the Middle District of North Carolina, which denied petitioner’s motion to dismiss the indictment, was filed on October 12, 1973, is reported sub nom. United States v. Kernodle, 367 F. Supp. 844 (M.D.N.C. 1973) ‘and is re- produced in part in Appendix A to this petition. (Appendix A, pp. 4a-13a.) JURISDICTION The judgment of the United States Court of Appeals for the Fourth Circuit affirming petitioner’s conviction, under 18 U.S.C. $371 and 18 U.S.C. $656, was entered on September 23, 1974. A petition for rehearing was timely filed in the Court of Appeals, and rehearing was denied by an order entered on October 23, 1974. An order staying issuance of the mandate uniii November 22. 1974 was entered on October 25, 1974. The jurisdiction of this Court is invoked under 28 U.S.C. §1254(1). QUESTIONS PRESENTED 1. Does it constitute a subversion of the function of the grand jury, an abuse of the grand jury’s process and the creation of an illegal and secret administrative subpoena for the Federal Bureau of Investigation, without the knowledge or anproval of the District Judge or the United States Attorney, to obtain from the District Court a grand jury subpoena, signed in blank by the Clerk, and io direct such subpoena to a commercial bank requiring production of records in its possession but having completed and altered tke . subpoena to provide for its “satisfaction” by delivery of such records to the Bureau’s agent in the field rather than to the grand jury or to tae District Court? 3 2. In the seventy years since this Court last construed the offense of “willful misapplication” in United States v. Britton, 107 U.S. 655 (1883), there has arisen a clear conflict among the decisions of the United States Courts of Appeal as to whether the re- quirement laid down Britton, that an indictment charg- ing this offense under 18 U.S.C. $656 must do so with specificity, continues to be binding; has he time now come, therefore, for this Court to resolve the conflict either by reaffirming its decision in Britton or by over- ruling it? 3. Does the offense of willful misapplication under 18 U.S.C. $656 include every “unauthorized, unjustifiable or wrongful use” of bank funds if done knowing that such transaction “somehow constituted a breach of bank laws or rules”, or is the offense limited to those transactions which, at the time they occur, are ob- viously improper and subject the bank to an increased risk of probable and foreseeable loss; and, if the former, is not tlie oivense unconstitutional and void for vague- ness? 4. Does it violate the Fifth and Sixth Amendments for a defendant first to be denied all access to records or minutes of grand jury proceedings for the purpose of determining upon what theory it indicted, then to be denied a bill of particulars, and finally to be convicted upon theories of fact and law not even suggested on the face of the indictment? CONSTITUTIONAL PROVISIONS. STATUTES AND RULES INVOLVED United States Constituicn, Amendment V United States Constitution, Amendment VI 18 U.S.C. $656 (Reproduced in Appendix B; pp. 1b--4b) 4 STATEMENT OF THE CASE This petition secks review by writ of certiorari of the judgment of the Court of Appeals for the Fourth Circuit affirming defendant Pollard’s conviction of one count of conspiracy under 18 U.S.C. $371 and three counts of mis- application of bank funds under 18 U.S.C. $656. Prior to the return of the indictment in this case, de- fendant Pollard had been a director of a state-chartered bank iocated in the Middle District of North Carolina and insured by the Federal Deposit insurance Corporation. Upon learning that the United States Attorney for the Middle District of North Carolina intended to present an indictment against him to the grand jury, the defendant moved the District Court first for an order requiring transcription of the grand jury’s proceedings and _ there- after for an order enjoining presentation to the grand jury of any evidence obtained by the government under a grand jury subpoena which had been signed in blank by the clerk and afterwards completed to state that it could be “satis- fied” by delivery of the materials sought to an agent of the FBI in the field. Both motions were denied on July 10. 1973 and, while an appeal to the Fourth Circuit from such denial was pending, the grand jury returned the indictment upon which the defendant was later tried. The defendant then moved to dismiss the indictment and for discovery of uny minutes or records of the grand jury’s proceedings, both of which were denied by the District Court’s Memo- randum Order filed on October 12, 1973. (Appendix A, p. 4a). The defendant’s petition to the Fourth Circuit for a writ of mandamus to review the order denying dis- missai of the indictinent was denied by an order of that Court filed on December 6, 1973. The indictment contained one count charging con- spiracy under 18 U.S.C. $371 and eighteen counts charg- 5 ing misapplication of bank funds under 18 U.S.C. $656, all naming as defendants the petitioner and three other persons. The first count, for conspiracy, charged that the four defendanis and persons unknown kad conspired to misapply bank funds and to defraud the United States with respect to its interest in the enforcement of “laws pertain- ing to the regulations [sic] of banks insured by the Federal Deposit insurance Corporation” (Indictment. p. 2). Count One named eight overt acts committed in furtherance of the conspiracy, each of which was also charged as a substantive offense in later counts. Count One and all eight of these substantive counts were dismissed as to the three cod:fendauts pursuant to their plea bargains. De- fendant Pollard was convicted upon Count One and was acquitted upon Counts Two through Sixteen. Count Seven- teen, of which the defendant was convicted, charged, in addition to certain jurisdictional aliegations, that the de- fendant, “with intent to injure and defraud the said Bank. did wilfully misapply and cause to be misapplied monies, funds and credits of said Bank in that the defendants did cause Loan Number 11615 to be made by the Bank to John J. Schopp, in the amount of $50,000, the proceeds of which were deposited to the account of Ketteridge Indus- tries, Inc., at said bank concealing the purpose for the loan and concealing the interest of H. CALLOWAY POLLARD, JR.. NORMAN GRAHAM SMITH and MARSHALL STE- WART, JR.; in violation of 18 U.S.C. $656; 2.” (Indictment, p. 15). Counts Eleven through Sixteen, of which the defendant was acquitted, and Counts Eightee~ and Nineteen, of which he was convicted, are identical except for the name of the borrower and the daic. number and amount of the loan. 6 At trial, the defendant sought, with respect to all the loan counts, including the three of which he was con- victed, to disprove any intent to injure or defraud by of- fering evidence that each loan, regardless of whether it was ultimately repaid, was actually a benefit to the bank, rather than an injury, because it decreased the overall risks of the bank by replacing the obligation of a borrower whose credit worthiness the bank’s own officers mistrusted with the obligations of solvent borrowers whose credit was superior, in the opinion of the same officers, all without actually advancing any additional funds. The Government called as a witness the bank officer who had made each of the loans in question, and defense counsel was permitted to ask, over the Government’s objection, whether there had been, at the time the loan charged in Count Eleven was made, any foresceability of loss therefrom and whether the loan benefited or injured the bank. The witness answered that the bank was muci: better off because the loan was made, and the defendant was acquitted as to that Count. When defense counsel attempted to repeat these questions as to a subsequent loan count, the trial judge sustained the Government’s objection and plainly indicated that objections to similar questions would also be sustained, apparently because he believed both foreseeability of loss at the time and the net effect of the transaction standing alone were irrelevant as to intent. (Appendix to Briefs in the Court of Appeals, pp. A-155, A-164-167). Despite this ruling, however, the trial judge did admit, over de- fendant’s objections, voluminous evidence to the effect that the loans had not been fully repaid. In instructing the jury, the trial judge again de- clined to require that, in order to find any intent to injure or defraud the bank, it must have appeared ar the time of the transaction that it would subject the bank to an un- reasonable or foreseeable Tisk of loss. Instead, he defined 7 misapplication as any “unauthorized, unjustified or wrong- ful use” of the bank’s monies and stated that, “it is only necessary that the defendant knew that the transactions somehow constituted a breach of bank laws or rules... .” (Appendix to Briefs in Court of Appeals, p. A-287). Because the trial judge had relied on the allegation of concealment to distinguish the defendant’s authority that the indictment should have been dismissed, the theory of concealment became the focal point of the evidence and jury arguments by both the Government and defense counsel. The following instruction by the trial judge, how- ever, presented the jury with four additional theories of guilt not even suggested by the indictment: “A misapplication may be accomplished by various means, such as the making of a loan which is insufficiently secured, or the making of a loan whiere the true recipient of the proceeds of the loan is concealed, or the making of a Joan where the bank officer’s or director’s interest is concealed, or the making of a loan where there is no intention to repay or where the maker is insolvent. A misapplication may also occur where a loan is made on the strength of fraudulent ap- plications or statements.” (Appendix to Briefs in Court of Appeals, p. A-286). At the close of the Government’s case and at the Close of all the evidence, the defendant moved for judg- ment of acquittal, which was denied on both occasions. Upon the jury’s verdict, judgment of conviction was entered and sentence imposed, and the defendant gave notice of appeal. The United States Court of Appeals for the Fourth Circuit affirmed on September 23, 1974 and denied rehearing on October 23, 1974. 8 REASON FOR GRANTING THE WRIT 1. THE WRIT SHOULD BE GRANTED TO PREVENT THE SUBVERSION OF THE FUNCTICN OF THE GRAND JURY AND TO PROHIBIT THE TRANSFORMATION OF THE GRAND JURY'S SUBPOENA INTO A SECRET AND ILLEGAL ADMINISTRATIVE SUBPOENA IN THE HANDS OF THE FBI. The procedure employed in this case vy agents of the Federal Bureau of Investigation, and approved by the courts below, represents a frightening and effective mech- anism for the destruction of individual privacy, one which should be condemned by this Court in the stronges: ierms available. The procedure was as foilows: agents of the FBI, for the purpose of commencing an investigation into the af- fairs of the North State Bank of Burlington, North Caro- lina, obtained from the office of the Clerk of District Court a series of grand jury subpoena forms signed by the Clerk in blank. The agents hen completed the forms directing each to the bank, requiring the production of specified documents, and providing that the subpoena could be “satisfied” by delivering the specified documents to the FBI. Because the bank sought to respect its duty of secrecy by delivering only the specified information, the FBI obtained a final subpoena, again providing for “satis- faction” by delivery to the FBI and calling for the fol- lowing: “All records, ledgers, documents, and corres- pondence to include all related commercial and personal checking accounts concerning com- mercial loan transactions conducted with the North State Bank during the period from 1967 through 1972.” 9 (Appendix to Briefs in Court of Appeals, p. A-21(a).) The bank then submitted to a wholesale examination of all books, records and documents in its possession, aband- oning its duty of secrecy under state law. See Sparks v. Union Trust Company of Shelby, 256 N.C. 478, 124 S.E. 2d 365 (1962). During the entire period described, the subpoenas so employed were never subjected to review by either the District Court or the United States Attorney; indeed, neither had even seen them at the time oral argu- ment was heard in the Court of Appeals on the defend- ant’s petition for mandamus. The defendant has no know- ledge as to what information or which of the decuments so obtained by the FBI were ever delivered to the grand jury or as to what disclosures or other uses the FBI has made or intends to make of such information or documents. Rule 17 of the Federal Rules of Criminal Procedure authorizes the issuance of a subpoena, signed in blank by the clerk. The Rule also provides, however, that subpoenas arc to be issued ty “a party requesting it. who shall fill in the blanks before it is served.” (Appendix B, p. 4b). The FBI, for whose use these subpoenas were issued, is in no sense a “party” and the provision that the subpoena may be satisfied goes beyond the authority conferred by the words “fill in the blanks”. Clearly, the Rule contem- plates that the grand jury subpoenas issued thereunder will be for the sole purpese of producing testimony and docu- ments bevore a sitting grand jury. The argument might readily be made that, because confidential information concerning his financial transac- tions constitutes property, the overbreadth of this last subpoena and the tact that it was used in support of an ongoing criminal nyestigation amounted to an unreason- able search and seizure in violation of the defendant's Fourth Amendment rights and, therefore, that the trial ‘ 10 judge’s failure to exclude all evidence so obtained was reversible error. See generally, in re September, 1971 Grand Jury, 454 F.2d 580(7th Cir. 1971) rev'd sub nom. United States v. Mara, 410 U.S. 19 (1973); In re Dionisio, 442 F.2d 276 (7th Cir. 1971) rev'd sub nom. United States v. Dionisio, 410 U.S. 1 (1973); Note, Government Access to Bank Records, 83 YALE L. J. 1439, 1455-65, 1473 n. 162 (June, 1974). The status of con- fidential information in the hands of institutional third parties, as property protected under the Fourth Amend- ment, is a crucial question of constitutional law, and one not yet finally resolved. While this argument is not the reason advanced herein for the granting of the writ, it should be observed that, if the practice described above is permitted to continue, the FBI will be free, by avoiding judicial review as shown below, to violate whatever Fourth Amendment rights do attach to such informational pro- perty. The argument which the defendant has asserted, even since before the grand jury was convened, is that the sub- poenas so employed by the FBI constitute an abuse of the grand jury process, and are for that reason invalid, that the evidence obtained by their use should have been sup- pressed, and that the defendant has standing to raise this objection. The evil of these subpoenas is threefold. First. they wholly avoid judicial supervision and whatever re- straints may be applicable to them. Second, they usurp to the FBI the grand jury’s role as an independent, investiga- tive body endowed with subpoena power. Third, they de- stroy the guarantee of secrecy which, except in judicially supervised instances, surrounds all the evidence produced pursuant to a grand jury subpoena. With respect to the first objection, the defendant sub- mits that he has standing to challenge these subpoenas 1] precisely because, if he has not, there will never be effec- tive judicial review of their use. This principle, in an anajogous form, was recently recognized by this Court in United States v. Nixon, —U.S.—, 41 L. Ed.2d 1039, 1054, 94 S.Ct. —, 42 U.S.L.W. 5237, 5240 (1974), citing with approval Perlman v. United States, 247 U.S. 7 (1918). Although arising in Nixon and Perlman as a question of timing, the applicable principle involved is that, if a subpoena issued at the instance of the govern- ment is improper, whether because it violates the de- fendant’s privilege or for any other reason not adversely affecting the third party to whom it is directed, then the defendant must be granted standing to object or the abuse will always go unchecked. The principle operates with special force upon institutional third-party custodians of information. See generally, Note, Government Acess to Bank Records, supra. In the present case, tne bank, in- timidated by apparent authority and having inadequate incentive to resist, made no objection to these subpoenas, despite their obviously burdensome scope. Grand juries and the offices of United States Attorneys, if either has an incentive, which is doubtful, may never object to such subpoenas because there is no guarantee that information gained by their use, or even the fact of their issuance, will ever be revealed to them by the FBI, as they were not in this case until the defendant raised an objection. Thus, if these subjoenas constitute an abuse of the grand jury pro- cess which ought te be challenged, the defendant is the only party with incentive to do so. The most compelling reason for which subpoenas such as these should be condemned is that, because there is no guarantee that the information and documents so obtained will ever be presented to the grand jury, there is also no guarantee that the same will be guarded by the oath of secrecy to which the grand jurors are sworn. Acting 12 with the apparent approval of the grand jury and the Court, although without supervision or direction by either, the FBI obtairs by these subpoenas a license which few will question to demand from one person information con- cerning or the property of another and then to make what- ever use of these it sees fit. These subpoenas contain no compulsion that the information or documents obtained be returned to the grand jury; indeed, under the procedure employed in this case, there need be no grand jury even sitting at the time. The FBI should not be permtited to convert by this practice the subpoena power of the grand jury into its own compulsory, administrative process. See Durbin v. United States, 221 F.2d 520, 522, (D.C. Cir. 1954); United States v. Johns-Ménville Corporation, 213 F. Supp. 65 (E.D. Pa. 1962); United States v. American Stevedores, Inc., 16 F.R.D. 164 (S.D.N.Y. 1954) (all of which condemn such conversion of grand jury subpoenas by the United States Attorney’s office, but by which the Court of Appeals declined to be bound in this case). The constitution and our comon law tradition recog- nize that, as the institutional conscience of the community, the grand jury ought to be empowered to pursue rumor and suspicion, and to enforce that pursuit by subpoena. The justification for this power is that when the grand jurors indict, the information so gained is made public sub- ject to judicial control; but when they do not, when their collective conscience is not persuaded of probable cause, then the information relevant to the accusations or sus- picions they reject is forever sealed by their oath of secrecy, and the accused is assured that, unless a subsequent grand jury is persuaded to indict, the information presented to the first will not be broadcast to his injury. No such public trust has been reposed in the FBI, nor has subpoena power been conferred upon it. 13 Defendant contends therefore, that the subpoenas employed in this case represent an illezga‘ and dangerous practice which should be prohibited by the order of this Court. Because no case better suited to present the issue is likely to arise, the prayed for writ of certiorari should be granted to review this case. 2. THERE CURRENTLY EXISTS A CLEAR CONFLICT AMONG THE CIRCUITS AS TO WHETHER WILLFUL MISAPPLICATION UNDER 18 U.S.C. $656 HAS CEASED, SINCE THE DECISION IN United States v. Britton, TO BE A GENERIC OFFENSE WHICH CAN- NOT BE SUFFICIENTLY CHARGED BY AN _ INDICT- MENT USING THE STATUTORY LANGUAGE ALONE. In United States v. Britton, 107 U.S. 655 (1883), this Court held that, because the words “willfully mis- apply” had no “settled technical meaning” and did not of themselves fully and clearly set forth every element of the offense, in an indictment charging misapplication, “It would not be sufficient simply to aver that the defendant ‘willfully misapplied’ the funds of the association . . . There must be averments to show how the misapplication was made, and that it was an unlawful one.” (emphasis added) 107 U.S. 655, 669. The indictment in that case was held defective because it failed to aver a conversion of funds, which the Court considered an essential element of the offense. 107 U.S. 655, 666. Since 1883, this Court has never again construed the offense of willful misapplication nor in any way narrowed its holding in Britton. Nonethe- less, in response to the defendant’s motion to dismiss this indictment, which likewise fails to allege conversion or to show why the transactions involved were unlawful, the District Court concluded that the term “willfully misappli- 14 ed” has now gained a technical meaning and so held this indictment, and others simultaneously being reviewed, “sufficient because they follow the language of the statute in charging a crime. The prevailing view today apears to be that it is sufficient to set out an offense under 18 U.S.C. $656 (for mis- application) by using the language of the statute, and the omission of detailing the means by which the offense was committed does not make the indictment insufficient.” (emphasis added, foot- note omitted) (Appendix A, p. 9a). Since the decision in 8ritron, the Courts of Appeal for the Second and Ninth Circuits have held that the words “willfully misapply” have evolved a sufficiently technical meaning to permit the oflense to be charged in the statutory language alone. See United States v. For- tunato, 402 F.2d 79, 81 (2nd Cir.) cert. denied 394 U.S. 933 (1969); Hargreaves v. United States, 75 F.2d 68 (9th Cir.) cert. denied 295 U.S, 759 (1935). The same con- clusion has been suggested in dictum by the Second, Fifth and Tenth Circuits. See United States v. Moraites, 456 F.2d 435, 441 (3rd Cir.) cert. denied 409 U.S, 819 (1972); United States v. Archambault, 441 F.2d 281, 283 (9th Cir.), cert. denied 404 U.S. 843 (1971); United States v. Bearden, 423 F.2d 805, 810-811 (Sth Cir.) cert. denied 400 U.S. 836 (1970). Recently rejecting this view, however, the First and Seventh Circuits have both required the additional aver- ments mandated by Britton. See United States v. Gens, 493 F.2d 216 (1st Cir. 1974); United States v. Quinn, 365 F.2d 256 (7ih Cir. 1966). Prior to the decision delow, it was clear that the Fourth Circuit too regarded Britton as controlling. Johnson v. United States, 95 F.2d 15 813 (4th Cir. 1938). Although Johnson was squarely in point, the Fourth Circuit, for reasons which cannot be ascertained from its per curiam opinion, upheld the Dis- trict Court’s refusal to dismiss the indictment. The con- fusion is enhanced by the fact that Gens, decided after the District Court’s denial of the motion to dismiss was re- ported, nonetheless recognized Johnson as being the law of the Fourth Circuit, even though the District Court's denial is, both in language and effect, utterly inconsistent with Johnson. Since the decision in Britton, the adoption of Rule 7(c) of the Federal Rules of Criminal Procedure has greatly reduced the specificity required of indictments gen- erally. However, this Court recognized, in Russell v. United States, 369 U.S. 749, 762, 765 (1962), that the sufficiency of any indictment charging an offense in statutory language must be measured against the Sixth Amendment's requirement that the defendant be adequately apprised of the nature of the accusation he must be pre- pared to meet. (Appendix B, p. Ib). To meet this requirement, the Court in Russell held that, where the Statute creating an offense contains “generic terms”, an indictment must descend to particulars rather than charg- ing the offense in the same generic terms, 369 U.S, 749, 762, 765. For exactly the same reason, the Court in Britton held that an indictment for misapplication is not sufficient unless it contains adidtional averments to “show how the misapplication was made, and that it was an un- lawful one.” Clearly, to make such a showing, the indict- ment must not only identify the transaction involved, but must also demonstrate or allege that cach of the elements of the offense in fact occurred. The defendant contends that the indictment in the present case was defective for failure to make such a showing, both because it omits an allegation of conversion and because neither the statutory i6 language nor the particulars alleged could apprise him of the nature of the charge he must meet while there persists, as will be shown below, a conflict among the circuits as to the elements of the offense itself. The defendant respectfully submits, therefore, that the writ should be granted because the time has now come for the Supreme Court either to reaffirm its holding in Britton or to approve the view that Britton is no longer the law. 3. THE WRIT SHOULD BE GRANTED BECAUSE THE DECISION BELOW CREATES A DIRECT CONFLICT AMONG THE CIRCUITS AS TO THE ELEMENTS WHICH CONSTITUTE THE OFFENSE OF MISAPPLICA- TION AND EXPANDS THAT OFFENSE FAR BEYOND THE INTENT OF CONGRESS. The offense of misapplication was apparently intended as a catchall. It is all the more important, therefore, unless Britton is specifically reaffirmed, to resolve the present con- flict among the circuits as to the elements of the offense. At the trial of this case, the defendant requested in- structions to the jury which incorporated the view of the First and Second circuits that, for a transaction to be a misapplication, it must be obviously improper and unjustifi- able and must subject the bank to a risk of probable and foreseeable loss. See United States v. Gens, 493 F.2d 216 (Ist Cir, 1974); United States v. Giordano, 489 F.2d 327 (2nd Cir. 1973); United States v. Docherty, 468 F.2d 989 (2nd Cir. 1972); United States v. Mulloney, 79 F.2d 566 (Ist Cir, 1935). The trial judge never gave the requested instructions and that failure, assigned as error on appeal, was approved by the Fourth Circuit’s per curiam affirm- ance. The instructions which the trial judge gave instead made virtually every use of bank funds which violates any 17 state or federal bank rule or regulation a felonious mis- application under 18 U.S.C. $656. (See pp. 6, 7 supra). These instructions are in plain conflict with the First and Second Circuit cases cited above, the thrust of which is that, unless the natural and probable consequence of 4 given transaction is to cause a Joss, the transaction itself affords no basis for inferring the intent to injure or defraud required in order to render it a misapplication. Clearly, there could be technical violations which, although pro- hibited, entail no such natural or probable consequence, do not reflect an intent to injure or defraud and were not, therefore, intended to be punished as felonies under 18 U.S.C. $656. If this conclusion is false, the Supreme Court should bring that fact to light and so give warning to the thousands of honest bank officers and directors who reason- ably believe that, while a good faith attempt to mect exigent circumstances with exceptions to established policy may prove an error of judgment, it will not give rise to criminal liability unless a criminal statute expressly so provides. Moreover, in the three substantive counts of which the defendant was convicted, the specific regulation violat- ed by those loans, if any, was never identified by the indictments or the United States Attorney. Even the trial judge’s instructions to the jury failed to identify any particu- lar law or regulation allegedly violated by those loans. This sequence of events has an important implication for the future, if the present indictment is upheld, because one must then conclude: (a) that, where an indictment de- scribes an apparently legitimate transaction but also alleges intent to defraud and concealment, a defendant may be required to stand trial for misapplication without first identifying the violation which made the transaction illegal; or (5) that, although a transaction ia fact violates no banking law or regulation and has no natural or foresee- 18 able tendency to injure the bank, indeed, even if it benefits the bank, it will yet constitute a felonious misapplication if the jury infers an intent to injure or defraud from the fact of “concealment” alone. The first conclusion involves a patent Genial of constitutional rights under the Fifth and Sixth Amendments. The second conclusion would render the offense impossible to disprove, if the transaction oc- curred at all. This is so because concealment requires no Overt act; it is itself a matter of intent. Moreover, in the present case, the Government’s evidence affirmatively showed that there was no concealment. More importantly, however, the second conclusion also extends the offense to include acts which this Court has heretofore held, in United States v. Britton, 107 U.S. 655, 668 (1883), give rise to civil, rather than criminal, liability as mere acts of maladministration. After almost one hundred years, the Courts of Appeal have still reached no consensus as to the precise meaning of the term “misapply”. If this reflects the fact that one cannot say what misapplication is, the time has come for the Supreme Court to say what it is not. It is not, as the trial judge should have instructed the jury upon request, a transaction which was not expressly prohibited by any banking law or regulation and was, as it appeared to the parties at the time, beneficial rather than harmful to the bank. It is no answer to say that a transaction which ap- pears to be benecial or from which no loss actually results may yet be a misapplication if effected with an intent to injure or defraud because, if the offense of misapplication is not to be limitless, there must at least be objective criteria to be satisfied before a jury will be permitted to infer the specific criminal intent. If no such criteria can be articulat- ed, the offense of misapplication under 18 U.S.C. $656 is void for vagueness. » ~ “, 19 In recent years reports of decisions involving sub- stantive questions with respect to the offense of misappli- cation have appeared with increasing frequency. These decisions, it may be surmised, reflect both the economic climate of our times and the spiraling number and com- plexity of state and federal regulations affecting banks. Under these circumstances, and because the lower courts have failed to develop one, the need has grown urgent for a definitive statement of the elements of the offense. The petitioner submits that the writ should be granted to pro- vide such a statement. 4. THE WRIT SHOULD BE GRANTED 10 RESULVE THE CONFLICT BETWEEN THE POLICY OF GRAND JURY SECRECY AND AN INDIVIDUAL’S RIGHT TO BE TRIED ONLY UPON THE INDICTMENT OF THE GRAND JURY. The doctrine is well settled that the deliberations of a grand jury and testimony before it, will ordinarily be kept secret although exceptions may be made, in the discretion of the trial judge, under the power conferred by Rule 6(e) of the Federal Rules of Criminal Procedure. See Dennis v. United States, 384 U.S. 855, 869-70 (1966). In direct conflict with this general policy is the fact that, unless a defendant has access to records of the testimony before and the deliberations of the grand jurors, his right under the Fifth and Sixth Amendments to be tried only upon the theory of guilt contained in their indictment may be render- ed nugatory. See, Russell v. United States, 369 U.S. 749, 770 (1962); Stirone v. United States, 361 U.S. 212, 217 (1960). The fact of this conflict and its prejudicial impact on a defendant, are clearly revealed in the case at bar, which presents, therefore, an appropriate occasion for its resolution by this Court. 20 Under Rule 7(c) of the Federal Rules of Criminal Procedure, the indictment need only be a “plain, concise and definite written statement of the essential facts con- stituting the offense charged.” (Appendix B, p. 3b). In the present case, the Court of Appeals has held, in effect, that such a statement may be sufficient in law to withstand a motion to dismiss, but still be so broadly worded as to permit the trial judge to instruct the jury on four theories of guilt not even suggested by the indictment on its face. This holding is in direct conflict with the rule of other circuits that, since the court and the prosecutor must not be allowed to guess what was in the minds of the grand jurors at the time they returned the indictment, only thicories apparent on the face of the indictment may be pre- sented to the petit jury. See, Russell v. United States, 369 U.S. 749, 770 (1962); United States v. Bryan, 483 F.2d 88, 96-97 (3rd Cir. 1972): United Siates v. Beard, 436 F.2d 1084, 1087 (Sth Cir. 1971), United States v. Silver- man, 430 F.2d 106, 1ii (2nd Cir. 1970). if the rule of the Second, Third and Fitth Circuits is an accurate expression of the law, the decision of the Court below should be reversed. Necessarily, however, such a rule would significantly restrict the notice pleading sought by Rule 7(c), especially as to catchall offenses sucn as misapplication. If the rule of these Circuits is not the law, then some restriction must be placed upon a trial judge's discretion under Rule 6(e); otherwise. the right proclaimed by Stirone and Russell may not survive at all, as the defendant's trial well demonstrates. The defendant's motion to record the grand jury proceedings was denicd, despite his offer to bear the expense thereof, as was his motion to discover any records or documents of those pro- ceedings. Moreover, even if the grand jurors did volun- tarily keep any such records, which is not known, the de- 21 fendant has no assurance that they would be sufficiently complete to prove or disprove that the four additional theories introduced by the judge’s instructions to the jury had in fact been considered by the grand jurors, much less included in the indictment itself. Of course, the conflict between these policies can normally be avoided if the trial judge will, in his discretion, order some records to be kept of grand jury proceedings and, when the need arives, grant a motion for a bill of particulars or discovery of these records. A defendant's constitutional rights, however, must not be made dependent upon the unfettered discretion of the judge. In the present case, the judge rejected out of hand every attempt by the defendant to discover the nature of the charge against him and, until the eve of trial, even denied him access by dis- covery against the bank to the same records which the FBI had obtained pursuant to its secret subpoena. Such a clear abuse of discretion makes this an appropriate case for this Court to review for the purpose of determining whether and how that discretion should be restricted. Three alternatives are available for the resolution of the conflict herein raised: first, to require universal recor- dation of grand jury proceedings or, at least. to make recordation upon motion a matter of right, which motion shall be prerequisite to any claim that the requirements of Russell and Stirone have not been met; second, to require. as to any indictment charging an offense the statute creat- ing which does not fully and clearly set forth all its ele- ments, a greater degree of specificity than presently re- quired under Rule 7(c); and, third, to restrict the discre- tion of a trial judge in denying bills of particulars and dis- covery of grand jury records, perhaps making at least one a matter of right, the choice as to which being left in each case to the judge. Whichever alternative is chosen, the 22 effect upon criminal procedure in state and federal courts would be profound and should, therefore, be uniform as well. The need for such a choice, by this Court, is clear, and no case will be better suited to raise and decide the issue than is the case at bar. The petitioner would respect- fully submit, therefore, that the writ of certiorari should be granted. CONCLUSION The case at bar raises two types of issues which, the petitioner believes, require review by this court. The issues raised herein involving the substantive law of mis- application of bank funds under 18 U.S.C. $656 are ripe for review by this Court because the Courts of Appeal have tailed to agree both as to the elements of the offense and as to whether those elements are so well Known as to permit the offense to be charged in statutory language. If the requirements of due process are to be preserved tor future defendants, it will be necessary for this Court either to define the offense or to declare it void. The two other issues raised hercin require the exercise by the Court of its supervisory control over our judicial system. The dis- cretion accorded trial judges under Rule 6(e) and the generality permitted in indictments under Rule 7(c) have been seen to thwart individual constitutional rights under the Sixth Amendment. There is needed an accommodation, either by restricting that discretion or by requiring more specilically worded indictments. The use by the FBI of grand jury subpoenas is a dangerous and important usurpa- tion of the grand jury’s function. If the writ were granted, the decision of this Court could prohibit and even prevent the recurrence of this abuse. It is, therefore, respectfully submitted that this peti- 23 tion for writ of certiorari to the United States Court of Appeals for the Fourth Circuit should be granted. Jack W. FLOYD Eric P. HANDLER Attorieys for Petitioner, H. Calisway Pollard OF COUNSEL: SMITH, Moore, SMITH, SCHELL & HUNTER 700 Jefferson Building Post Office Drawer G Greensboro, North Carolina 27402 Teiephone: (919) 273-8263 APPENDIX A—OPINIONS AND ORDERS BELOW UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 74-1368 UNITED STATES OF AMERICA, -4ppellee, versus H. CALLOWAY POLLARD, JR., Appellant. Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. Hiram H. Ward, District Judge. Argued September 4, 1974 Decided September 23, 1974 Before HAYNSWORTH, Chief Judge, RUSSELL and WIDENER, Circuit Judges. - Jack W. Floyd (Eric P. Handler and Smith, Moore, Smith, Schell and Hunter on brief) for Appellant; N. Carlton Tilley, Jr., United States Attorney, (Hugh P. Mabe, Ii, Attorney, Criminal Division, United States —— of Justice, on brief) for Appellee. PER CURIAM: H. Calloway Pollard, Jr., was convicted by a jury of three counts of willful misapplication of bank funds in violation of 18 U.S.C. $656 and one count of conspiracy willfully to misapply bank funds and to defraud the United States in violation of 18 U.S.C. $371. Upon consideration of the record, briefs and oral argument, we find no reversible error. AFFIRMED. 2a Filed Oct. 23, 1974, William K. Slate, II, Clerk United States Court of Appeals for the Fourth Circuit No. 74-1368 United States of America, Appellee, versus H. Calloway Pollard, Jr., Appellant. Appeal from the United States District Court for the Middie District of North Carolina, at Greensboro. Upon consideration of the petition for rehearing with the request for rehearing en banc in the above entitled case, and with the concurrence of Judges Russell and Widener, no member of the court having requested a poll, IT IS ORDERED that the petition for rehearing be, and the same is hereby, denied. FOR THE COURT: a/CLEMENT F. HAYNSWORTH, JR. Chief Judge, Fourth Circuit A True Copy, Teste: VILLIAM K. Strate, Il, Clerk By Faye CHLONIE, Deputy Clerk 3a Filed Oct. 25, 1974, William K. Slate, II, Clerk United States Court of Appeals for the Fourth Circuit No. 74-1368 — United States of America, Appellee, versus H. Calloway Pollard, Jr., Appellant. Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. Hiram H. Ward, District Judge. Upon motion of the appellant, by counsel and for cause shown, IT IS ORDERED that the mandate in the above- entitled case be, and it is hereby, stayed pending applica- tion of the appeilant in the Supreme Court of the United States for a writ of certiorari to this Court to and includ- ing Friday, November 22, 1974. For the Court—by Direction. /s/ WILLIAM K. SLATE, II, Clerk A True Copy, Teste: WILLIAM K. SiarteE, II, Clerk By FRANCES S. SEWELL, Deputy Clerk 4a Filed Oct. 12, 1973, Carmon J. Stuart, Clerk IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRCT OF NORTH CAROLINA GREENSBORO DIVISION UNITED STATES OF AMERICA Vv. Cr-279-G-73 JOHN ROBERT KERNODLE NoRMAN GRAHAM SMITH UNITED STATES OF AMERICA v. Cr-280-G-73 JOHN ROBERT KERNODLE H. CALLOWAY POLLARD, JR. MARSHALL STEWART, JR. UNITED STATES OF AMERICA Vv. Cr-28 1-G-73 Houston P. SHARPE NorRMAN GRAHAM SMITH CHARLES M. MCMILLAN MEMORANDUM ORDER WARD, District Judge The three above-entitled cases charge various officers and directors of the North State Bank of Burlington, North Carolina, and defendant McMillan with willfully mis- applying bank monies, funds, and credits. Each indict- ment charges defendants in Count One of their respective Sa indictments with conspiracy. The remaining counts charge a violation of 18 U.S.C. $656 and 18 U.S.C. 82. In ad- dition, the indictment in Cr-281-G-73 charges those de- fendants witn making a false financial statement in viola- tion of 18 U.S.C. §1014. All defendants are charged in each count of their respective indictments. Prior to arraignment on October 5, 1973, these de- fendants filed various motions attacking the indictments and requesting severance. The Court initially denied those motions for reasons as set out in this memorandum order. Due to the similarity of some of the contentions raised in these three cases, the Court has decided to deal with all of the motions in this order. Generally, all defendants attack the sufficiency of both the conspiracy and substan- tive counts of the indictments. They also challenge the grand jury proceedings which issued the indictments. Some defendants have aiso moved for a severance. I SUFFICIENCY OF THE INDICTMENT RELATING TO THE COUNTS CHARGING A VIOLATION OF 18 U.S.C. $656 Each of the indictments charges the defendants with violation of 18 U.S.C. $656 in that they allegedly willfully misapplied bank funds. In Cr-279-G-73 Counts Two through Eleven contain those charges. ! 1Count Two charges, in material part, the defendants “with intent to injure and defraud the said Bank, did wilfully misapply and cause to be misapplied monies, funds, and credits of said Bank in that the defendants did cause Loan Number 9252 to be made by the Bank to Barbara T. Smith, in the amount of $40,000.00, the proceeds of which were deposited in the account of the de- fendants, concealing the purpose for the loan and concealing the interests of JOHN ROBERT KERNODLE and NORMAN GRA- HAM SMITH in the loan, which loan was financially unsound; in violation of 18 U.S.C. 656; 2.” The remaining counts allege the same type of transaction with only the date, loan number, amount and recipient being different. 6a In Cr-280-G-73, Counts Two through Nineteen allege violation of 18 U.S.C. $656. Counts Two through Ten of that indictment charge defendants with causing checks to be paid from an insufficient funds account.? Counts Eleven through Nineteen allege a misapplication by the making of loans.3 In Cr-281-G-73 the allegations as to 18 U.S.C. $656 appear in Counts Two through Twenty-Four. Counts Two through Twenty-One charge a misapplication by writing checks on an insufficient funds account, using the same format as Counts Two through Ten in Cr-280-G-73 as set out in footnote 2. Counts Twenty-Two through Twenty- Four of Cr-281-G-73 charge misapplications by the making of loans, using the format of Counts Eleven through Nine- teen in Cr-280-G-73 as set out in footnote 3. 2Count Two charges. in material part, the defendants “with intent to injure and defraud the said Bank, did wilfully misapply and cause to be misapplied the sum of $21,525.65 of the monies of the said Bank, in that the defendants did cause to be paid out of the monies and funds of the said Bank a check in the amount of $21,525.65, dated December 23, 1970, drawn on the account of Ketteridge Industries, Inc., which, as the defendants well knew, did not contain sufficient funds to cover the said check, whereby the possession, control, and use of said monies and funds of the Bank were converted and misapplied to the use and benefit of Ketteridge Industries, Inc.. NORMAN GRAHAM SMITH, H. CALLOWAY POLLARD, JR., and MARSHALL STEWART, JR.: in violation of 18 U.S.C. 656; 2.” The remaining counts are the same except for dates and amounts. 3Count Eleven charges, in material part, the defendants “with intent to injure and defraud the said Bank did wilfully misapply and cause to be misapplied monies, furds, and credits of said Bank in that the defendants did cause Loan Number 10012 to be made by the Bank to Ketteridge Industries, Inc., in the amount of $260,- 000.00, the proceeds of which were deposited in said Bank to the account of Ketteridge Industries, Inc., concealing the purpose for the loan and concealing the interest of Hi CALLOWAY POLLARD, JR.. NORMAN GRAHAM SMITH and MARSHALL STEYVAF.T, JR.; in violation of 18 U.S.C. 656; 2.” The remaining counts are the same except for different cates, loan numbers, amounts. and recipients. Ta Defendants contend that the counts charging a mis- application of bank monies, fu.cds, or credits do not con- form to the requirements of Rule 7(c), Federal Rules of Criminai Procedure. As to the counts alleging misapplica- tion through the payment of checks drawn on insufficient funds accounts, they claim that the indictment fails to show that the company on whose account the ciiecks were drawn was insolvent and thus unable to repay the bank. They state that the company may have given security or had some arrangement with the bank for repaying the checks. They state that the indictment must show that the company did not have other accounts in the bank which contained funds. They also say that regulations contained in 12 C.F.R. $7.1161 permits banks to extend credit through use of overdrafts. In regard to the misapplication charges through use of loans, they claim that the indictment must allege that the loans would and could not be repaid. They say that the defendants’ interest and purpose in the loans must be more specifically stated and. the indictment must detail the defendants’ involvement in making the loans. They state that the contention of the indictments that they concealed their purpose and interest in the loans does not cure the defect of insufficiency. To summarize, the defend- ants claim that in an indictment charging misapplication under 18 U.S.C. £656, the government must detail the facis behind the charge, give particulars as to the involve- ment of the defendants and explain why the transaction was illegal. They claim that the three indictments merely allege garden variety banking transactions and that the charges that defendants acted with intent to defraud, to conceal their interests, or to convert bank funds and monies merely states a conclusion but does not inform them of the nature of the charges against them. In support of their contentions, defendants rely upon United States v. Britton, 107 U.S. 655, 2 S.Ct. 512, 27 8a L.Ed. 520 (1883), for the proposition that the term ‘willfully misapplied’ has no set meaning and, therefore, the indictments must particularize the means whereby the alleged misapplications were accomplished in order to sufficiently inform them of the charges which tiey face. In addition, they place heavy reliance upon Johnson v. United States, 95 F.2d 813 (4th Cir. 1938), for their contention that an indictment under 18 U.S.C. $656 must negate any possibility that the banking transaction might be legitimate or that the monies taken or paid out might be repaid at a future date. In Johnson v. United States, supra, the court held that an indictment under what is now 18 U.S.C. $656 did not charge an offense. The indictment charged in the language of the statute and then went on to explain defendant's actions in detail. The indictment charged that defendant took a note from another individual, discounted it, and credited the funds to his personal checking account which had been overdrawn. The court noted that allegations failed to show a fraud on the bank, or a conversion of bank funds, since the funds were never withdrawn. In effect, the court found that the allegations particularizing the crime merely recounted routine banking transactions. The Court finds significant differences between the indictments here and those in Johnson v. United States, supra. Here, the counts as to checks drawn on insufficient 4As summarized in United States v. Docherty, 468 F.2d 989, 994 (2nd Cir. 1972): . . . On the other hand, Johnson v. United States, 95 F. 2d 813 (4 Cir. 1938) (Soper, J.), held that no crime was charged when the indictment alleged only that a bank president, whose conduct was characterized with a copious array of pejorative adverbs, had discounted a note payable to himself and applied the proceeds to his own account, in order to meet an overdraft. The court found the indictment flawed since there was no allegation that the maker was known to be insolvent or to have an intention not to pay. 9a funds accounts in adition claim that the funds were con- verted. In Johnson there was no claim that the note was bad or that the defendant converted the funds. In the present indictments the counts relating to the loans also claim that the defendants concealed the purpose of the loans and their interests in them. In Johnson there was no concealment, and in fact there the defendant was quite candid about what he did. The Court also finds significant that here the indictments charge many different misapplica- tions involving large sums of money, whereas in Jo/inson, the alleged misapplication occurred once, and only in- volved $600.5 The Court finds that the present indictments sufficiently inform defendants of how the alleged misap- plication took place and indicate why it was unlawful. The Court cannot read these indictments and come to the conclusion that only an ordinary banking transaction is charged. These indictments allege conversion and conceal- ment as essential ingredients of the transactions. While the Court holds that the present indictments sufficiently explain the means whereby the misapplications arose, it also holds that [sic] indictments sufficient because they follow the language of the statute in charging a crime.® SIn United Stares v. Moraites, infra, 456 F.2d 435, the court said it need not consider whether an indictment charging an offense under 18 U.S.C. §656 and framed in the language of the statute would be sufficient standing alone, since in that case the first count of the indictment charged an elaborate conspiracy to misapply bank funds, and all defendants were charged in both the conspiracy and the challenged substantive counts. The same could be said of the three indictments in the present case. In fact, it appears that the indictments in the present case are more informative than those in United States v. Moraites, supra, at 440 n. 7, which the court held sufficient. 6The essential elements of 18 U.S.C. $656 in this case are (1) the accused was an officer, director, etc., of a bank; (2) the bank had a particular type of federal connection; (3) the accused will- fully misapplied money, etc., of said bank; and (4) the accused acted with intent to injure or defraud the bank. 10a The prevailing view today appears to be that it is sufficient to set out an offense under 18 U.S.C. $656 (for misapplica- tion) by using the language of the statute, and the omission of detailing the means by which the offense was committed does not make the indictment insufficient. United States v. Archambault, 441 F.2d 281, 283 (10th Cir. 1971), cert. denied, 404 U.S. 843 (1971); United States v. Bearden, 423 F.2d 805, 810-11 (Sth Cir. 1970), cert. denied, 400 U.S. 836 (1970); United States v. Fortunato, 402 F.2d 79, 81-2 (2nd Cir. 1968), cert. denied, 394 U.S. 933 (1969); and see aiso United States vy. Moraites, 456 F.2d 435, 440-41 (3rd Cir. 1972), cert. denied. Those cases either implicitly or explicity hold that the term ‘willfully misapplied’ as used in 18 U.S.C. $656 is not so vague and indefinite a word so as to necessitate further explanation. (See United States v. Moraites, supra, at 441 n. 9 for citation of authorities that this term as used in 18 U.S.C. §656 has gained a technical meaning since the decision in United States v. Britton, supra, which was decided in 1883.) Since the decisions in Britton (1883) and Johnson (1938), Congress has adopted new rules of criminal pro- cedure to replace the old common law rules of pleading. Rule 7(c), Federal Rules of Criminal Procedure, became effective in 1946. As stated in Wright, Federal Practice and Procedure, Vol. 1, $123 at 219-21 (1969): Rule 7(c) put an end to “the rules of technical and formalized pleading which had characterized an earlier era.” The complex requirements of common law criminal pleading and of some state practices are now obsolete. The precision and detail formerly demanded are no longer required, imperfections of form that are not prejudicial are disregarded, and common sense and reason prevail over technicalities. lla The fundamental functions and requirements of an inggetment have not been modified, and it is still essential that every element of an offense be stated and that the defendant be given fair notice of the charge against him, but the rule now permits a plain, concise, and definite statement of the essential facts constituting the offense. The sagacity of Rule 7(c) readily appears in the instant case. An indictment charging a violation of 18 U.S.C. $656 may indeed involve complex matters of banking law and policy at the trial. To do as defendants suggest and require that all the details of the alleged illegal transaction be explained in detail would result in a reversion to the common law technical form of pleading. To avoid this result, the government necessarily must rely upon con- clusory statements, the facts of which must be proved during the trial. The Court holds that the term ‘willfully misapplied’ through the years has acquired a specific mean- ing so as to enable the defendants to be put on notice of the crime for which they are charged and to enable them to prepare their defense.” In addition, these three indict- 7A misapplication is an unauthorized, unjustifiable, or wrongful use of the bank’s monies, funds, or credits. However, the term ‘willful misapplication’ as used in 18 U.S.C. $656 means a criminal misapplication rather than a mere act of maladministration. In order for there to be a willful misapplication, the defendant must convert to his own use, benefit, or gain, or to some other person’s or com- pany’s use, benefit, or gain, the monies, funds, or credits of the bank. However, it is not every such unauthorized or unlawful ap- propriation of monies, funds, or credits which is punishable, but only those acts willfully done with the specific intent to defraud or deceive the bank. See United States v. Moraites, supra, at 441 and cases cited in footnote 9, and United States v. Docherty, supra, 468 F.2d 989 (2nd Cir. 1972). The fact that the bank may suffer no loss or injury, or that there is a future possibility of repayment or benefit to the bank is no defense. The offense is complete im- mediately upon the act of willful misapplication with intent to de- rm or deceive. United States v. Acree, 466 F. 2d 1114 (10th Cir. 1972). 12a ments sufficiently explain the transactions to defendants so as to comply with Rule 7(c). In regard to defendants’ contentions that the trans- actions alleged in the indictments can be shown to be legal, it is enough to say that they will have ample opportunity to present their evidence at the trial. To require the govern- ment to negate every possible or unusual defense con- travenes the purpose of Rule 7(c) and would lead to a mini-trial prior to arraignment in order to determine whether a particular transaction could or might be merely irregular rather than illegal. Such a procedure is neither good policy, nor is it the law. As stated in United States v. Thomas, 444 F.2d 919, 926 n. 23 (D.C. Cir. 1971): As a general rule, it is not required that matters of defense be negated in an indictment or information. Evans v. United States, 153 U.S. 584, 590, 14 S.Ct. 934, 38 L.Ed. 830 (1894); Fippin v. United States, 162 F. 2d 128, 131 (9th Cir. 1947); United States v. Branigan, 299 F. Supp. 225, 228 (S.D.N.Y. 1969). See generally 1 C. Wright, Federal Practice and Pro- cedure $125 (1969). See also United States v. Vannatta, 189 F. Supp. 939, 941 (D. Hawaii 1960), which applied the general rule to a case involving 18 U.S.C. $656. % * * [The remaining sections of the Memorandum Order deal with issues not pertinent to this petition and are, therefore, omitted. ] % * *% IT IS THEREFORE, ORDERED that each defend- ant’s motion as to each and every particular be, and the same hereby is, denied. The motion for severance is denied without prejudice to its being raised again after defendants i3a have completed their discovery, and in such time in ad- vance of trial to permit the Court to give adequate con- sideration to it. s/ HirAM H. WARD United States District Judge A True Copy, Teste: CARMON J. Stuart, Clerk By WAYNE N. EvERHART, Deputy Clerk APPENDIX B CONSTITUTIONAL PROVISIONS, STATUTES AND RULES INVOLVED United States Constitution, amend. V: “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensat:on.” United States Constitution, amend. VI: “In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.” 18 U.S.C., S656: “Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, national bank or insured bank, or a receiver of a national bank, or any agent or employee of the receiver, or a Federal Re- 1b 2b serve Agent, or an agent or employee of a Federal Reserve Agent or of the Board of Governors of the Federal Reserve System, embezzles, abstracts, purloins or willfully misapplies any of the moneys, funds or credits of such bank or any moneys, funds, assets or securities intrusted to the custody or care of such bank, or to the custody or care of any such agent, of- ficer, director, employee or receiver, shall be fined not more than $5,000 or imprisoned not more than five years, or both; but if the amount embezzled, abstract- ed, purloined or misapplied does not exceed $100, he shall be fined not more than $1,000 or imprisoned not more than one year, or both. As used in this section, the term “national bank” is synonymous with “national banking association”; “member bank” means and includes any national bank, state bank, or bank and trust company which has be- come a member of one of the Federal Reserve banks; and “insured bank” includes any bank, banking uas- sociation, trust company, savings bank, or other bank- ing institution, the deposits of which are insured by the Federal Deposit Insurance Corporation. June 25, 1948, c.645, 62 Stat. 729.” Rule 6(e), Federal Rules of Criminal Procedure: “SECRECY OF PROCEEDINGS AND DIS- CLOSURE. Disclosure of matters occurring before the grand jury other than its deliberations and the vote of any juror may be made to the attorneys for the government for use in the performance of their duties. Otherwise a juror, attorney, interpreter, steuographer, operator of a recording device, or any typist who transcribes recorded testimony taay disclose matters occurring before the grand jury only when so directed by the court preliminarily to or in connection with a 3b judicial proceeding or when permitted by the court at the request of the defendant upon a showing that grounds may exist for a motion to dismiss the indict- ment because of matters occurring before the grand jury. No obligaiion of secrecy may be imposed upon any person except in accordance with this rule. The court may direct that an indictment shall be kept secret until the defendant is in custody or has given bail, and in that event the clerk shall seal the indict- ment and no person shall disclose the finding of the indictment except when necessary for the issuance and execution of a warrant or summons.” Rule 7(c), Federal Rules of Criminal Procedure: “(c) Nature and contents (1) In general. The indictment or the informa- tion shall be a plain, concise and definite written state- ment of the essential facts constituting the offense charged. It shall be signed by the attorney for the government. It need not contain a formal commence- ment, a formal conclusion or any other matter not necessary to such statement. Allegations made in one count may be incorporated by reference in another count. It may be alleged in a single count that the means by which the defendant committed the offense are unknown or that he committed ittby one or more specified means. The indictment or information shall state for each count the official or customary citation of the statute, rule, regulation or other provision of law which the defendant is alleged therein to have violated. (2) Criminal forfeiture. When an offense charg- ed may result in a criminal forfeiture, the indictment or the information shall allege the extent of the inter- est or property subject to forfeiture. 4b (3) Harmless error. Error in the citation or its omission shall not be ground for dismissal of the in- dictment or information or for reversal of a conviction if the error or omission did not mislead the de’ endant to his prejudice.” _ Rule 17(a), (c), Federal Rules of Criminal Procedure: Rule 17. Subpoena. (a) FOR ATTENDANCE OF WITNESSES; FORM; ISSUANCE. A subpoena shall be issued by the clerk under the seal of the court. It shall state the name of the court and the title, if any, of the proceed- ing, and shall command each person to whom it is directed to attend and give testimony at the time and place specified therein. The clerk shall issue a sub- poena, signed and sealed but otherwise in blank to a party requesting it, who shall fill in the blanks before it is served. A subpoena shall be issued by a United States magistrate in a proceeding before him, but it need not be under the seal of the court. (c) FOR PRODUCTION OF DOCUMENT- ARY EVIDENCE AND OF OBJECTS. A subpoena may also command the person to whom it is directed to produce the books, papers, documents or other objects designated therein. The court on motion made promptly may quash or modify the subpoena if com- pliance would be unreasonable or oppressive. The court may direct that books, papers, documents or ob- jects designated in the subpoena be produced before the court at a time prior to the trial or prior to the time when they are to be offered in evidence and may upon their production permit the books, papers, docu- ments or objects or portions thereof to be inspected by the parties and their attorneys. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_0155%3A1. Public record. Not legal advice.