# Petition for Writ of Certiorari — Mann v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_1770%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1976 - **Citation:** 423 U.S. 1087 ## Text fi In THE NeT ¢ : Supreme Court of : the United States Ocroser TERM, 1975 No @5-619 1 Rospert A. Mann And Bank or THE SourHwEst, NATIONAL ASSOCIATION, Petitioners Vv. Unrtep States oF AMERICA, Respondent PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT Seacau V. WHEATLEY CuestTer FuitTon Cart Rosin TEAGUE Fulbright & Jaworski (On The Brief) Bank of the Southwest Oppenheimer, Rosenberg, Building Kelleher & Wheatley, Inc. Houston, Texas 77002 Suite 620, 711 Navarro ( Morton L. SusMan San Antonio, Texas 78205 5009 Pwo Shell Plaza Wri R. EckHarpt Houston, Texas 77002 Vi Elkins, Searls, ia ‘Connally & Smith . Attorneys for Petitioner, Bank of the Southwest, First City National National Association Bank Building Houston, Texas 77002 Harotp R. DeMoss, JR. Bracewell & Patterson First City National Bank Building Houston, Texas 77002 Attorneys for Petitioner, Robert A. Mann Bowne of Houston, Inc. Printed in U.S.A Bester INDEX OPINIONS OF THE COURTS BELOW JURISDICTION OF THE SUPREME COURT QUESTIONS PRESENTED FOR REVIEW CONSTITUTIONAL PROVISIONS, STATUTES and REGULATIONS INVOLVED STATEMENT OF THE CASE A. COURSE OF THE PROCEEDINGS B. BACKGROUND OF PROCEEDINGS REASONS RELIED ON FOR THE ALLOWANCE OF THE WRIT I. The decision of the Cone of Meets con- II. flicts with the applicable principles estab- lished by this Court in that the Court of Appeals erred in failing to affirm the holding of the trial court that: A. The indictment, as clarified by the Bill of Particulars, failed to state the offense of conspiracy under 18 U.S.C. § 371 to will- fully misapply funds of a national bank as prohibited by 18 U.S.C. § 656. B. This prosecution deprives Petitioners of due process of law because the Petitioners did not have prior notice that the acts charged were criminal acts . The Court of Appeals decided an ipentenst question of law which has not been, but should be, settled by this Court because this case involves the nation’s entire national banking industry and is a case of first impression in this court. The indictment presents allega- tions of fact not heretofore believed by the banking industry to constitute a crime, nor expressly prohibited by any statute or regu- lation, and involving a practice which the Department of Justice concedes to be common and widespread. In addition, the transaction for which Petitioners have been indicted as constituting a willful misapplication of bank i SEN ENE ARG, 1/5 BONAR SI LLL NPL INO CPM NEE TA PINS RET 15 18 "TTe Hanae III. funds within the meaning of 18 U.S.C. § 656 has been treated inconsistently by the Comp- troller of the Currency and the Department of Justice, causing widespread confusion in the banking industry, and is of a type which is still being sanctioned by the Federal Reserve RNS oti cca ss Vande ae The Court of homie in its ites, bak so far departed from the accepted and usual course of judicial proceedings as to call for this Court’s power of supervision. The Court of Appeals held that at a Rule 12 hearing on Motion to Dismiss, the defenses of lack of fair notice to the Petitioners and of violation of Petitioners’ constitutional rights of due process were not capable of determination based on undisputed evidence without trial of EY ee em OE eee 28 APPENDIX A. B. C. Opinion and Judgment of the Court of Appeals A-1 Memorandum and Order of The District Court B-1 Constitutional Provisions, Statutes and Regn- lations Involved : .. C-l Orders Issued by the Board of Governors of the Federal Reserve System . D-l Fee A a TABLE OF AUTHORITIES Cases Anderson National Bank v. Luckett, 321 U.S. 233, 64 S.Ct. 599, 88 L.Ed. 692 (1944) ................ 17 Bouie v. Columbia, 378 U.S. 347, 84 S.Ct. 1697, 12 L.Ed.2d 894 (1964) oe NS 19 Coffin v. United States, 156 U.S. 432, 15 S.Ct. 394, 40 L.Ed. 1109 (1895) . PEL WIRE CaP ae 22 Raley v. Ohio, 360 U.S. 423, 79 S, Ct. 1257, 3 L. Ra. 2d 1344 (1959) .... ANA ECORI URN IK PRR MT SIT ae D-7 Another ground for denial is our assessment that the proposed acquisition debt to be assumed by Applicant is high in relation to its equity. Applicant is a newly formed corporation and the earnings of Bank would serve as its primary source of funds. The large debt servicing require- ments for the purchase of approximately 95 per cent of the stock of Bank could place an undue strain on the finan- cial condition of Bank and impede Bank’s ability to provide adequate banking services to the community. In our view, the projected earnings of Applicant (derived from Bank) do not provide Applicant with the necessary financial flexibility to meet its annual debt servicing requirements as well as any unexpected financial needs that might arise at Bank. For the foregoing reasons, we do not regard the proposal as being in the public interest, and we would deny the appli- cation. NBC CORPORATION, ALTUS, OKLAHOMA ORDER APPROVING FORMATION OF BANK HOLDING COMPANY* NBC Corporation, Altus, Oklahoma, has applied for the Board’s approval under §3(a)(1) of the Bank Holding Company Act (12. U.S.C. 1842)(a)(1)) of formation of a bank holding company through acquisition of more than 80 per cent of the voting shares of The National Bank of Com- merce, Altus, Oklahoma (“Bank”). Notice of the application, affording opportunity for inter- ested persons to submit comments and views, has been given in accordance with 4 3(b) of the Act. The time for filing comments and views has expired, and the Board has con- sidered the application and all comments received, including those submitted by the Comptroller of the Currency, in °61 Federal Reserve Bulletin, F ebruary, 1975 at 106. ELEY LAELIA PONE A Mit PIE LN LYN AS a LS BON ME Se CEASA Pe —— D-8 light of the factors set forth in § 3(c) of the Act (12 U.S.C. 1842(c)). Applicant is a recently-organized corporation formed for the purpose of becoming a bank holding company through the acquisition of Bank. The proposed transaction essen- tially involves the transfer of ownership from individuals to a corporation owned by the same individuals with no change in Bank’s management or operations. Bank (depos- its $15.6 million)! is the second largest among six banking organizations competing in its banking market”, and holds about 28.4 per cent of the market’s total commercial depos- its. Upon acquisition of Bank, Applicant would control about 0.2 per cent of total commercial bank deposits in the State. Applicant’s principal shareholders also control the First State Bank, Grandfield, Oklahoma; however, that bank is located 75 miles southeast of Bank in a separate market area and does not compete with Bank. Since the subject proposal represents merely a restructuring of exis- ting ownership interests, its consummation would not elim- inate any existing competition, nor would it appear to have any adverse effects on other banks or on the development of competition in the relevant market. Therefore, com- petitive considerations are consistent with approval of the application. The financial condition and managerial resources of Ap- plicant and Bank are considered to be generally satisfac- tory and the prospects of each appear favorable. The Board notes that the Comptroller of the Currency has expressed some concern that consummation of this proposal may result in a burden upon Bank’s earnings. However, on the basis of the Board’s review of the financial resources of Bank and Applicant, the Board is of the view that, although Applicant will incur debt in the acquisition of Bank, Applicant appears to be able to service the debt 1 Deposit data are as of December 31, 1973. 2The relevant market is approximated by Jackson County. GEIS hae Saar SERINE “EST Lg UF LPAI MO OLE EEL Oe GD D-9 without impairing the financial condition of Bank. In addi- tion, it appears that Applicant will be assuming a preferen- tial interest rate on certain bank stock loans made to Bank’s major shareholders. Although the Board has expressed some concern about such loans in the past, there is no evi- dence in the record indicating that the loans in this case have resulted in any abuses to Bank or the minority share- holders. Considerations relating to the banking factors are consistent with approval of the application. Although there will be no immediate change or increase in the services offered by Bank as a result of the shifting of Bank’s owner- ship to a corporation, considerations relating to the con- venience and needs of the communities to be served are con- sistent with approval of the application. It is the Board’s judgment that the proposed transaction is consistent with the public interest and that the application should be approved. On the basis of the record, the application is approved for the reasons summarized above. The transaction shall not be consummated (a) before the thirtieth calendar day following the effective date of this Order or (b) later than three months after the effective date of this Order, unless such period is extended for good cause by the Board, or by the Federal Reserve Bank of Kansas City, pursuant to delegated authority. By order of the Board of Governors, effective January 23, 1975. Voting for this action: Chairman Burns and Governors Holland, Wallich, and Coldwell. Voting against this action: Governors Mitchell and Sheehan. Absent and not voting: Governor Bucher. (Signed) THropore E. ALLISON, [SEAL } Secretary of the Board. D-10 DissENTING STATEMENT OF Governors MITCHELL AND SHEEHAN We would deny the application of NBC Corporation to acquire The National Bank of Commerce (“Bank”) since we believe that it is not in the public interest to sanction an arrangement wherein it appears that Bank’s resources are being used to subsidize the personal interests of the principal shareholders of Bank. Specifically, the owners of a majority of the shares of Bank, who will also become the majority shareholders of Applicant, secured loans from Liberty National Bank and Trust Company of Oklahoma City, Bank’s principal correspondent, at a preferential in- terest rate. Under this proposal, Applicant will assume the outstand- ing indebtedness of Bank’s majority shareholders, along with the preferential interest rate, and Bank will continue its correspondent relationship with Liberty National. In our view, such an arrangement could result in a conflict of interest or breach of fiduciary duty on the part of the bor- rowing officials if the setting of the preferential interest rate, by formal or informal arrangement between the lend- ing bank and Bank, entails Bank assuming a portion of the interest costs of its major stockhclders. This could be ac- complished by various means, including maintenance by Bank of an inflated correspondent balance at the lending bank, sales by Bank of Federal funds to the lending Bank at below market rates, or placing of certificates of time de- posit at below market rates. On the other hand, if such arrangements are not entered into between the lending bank and Bank, the lending bank’s stockholders are placed at an obvious disadvantage as a result of their management mak- ing loans well below prevailing rates of interest. Bank stock loans at competitive rates are appropriate as short-term credits, or “bridge loans”, while longer term financing of the take-over is being arranged. However, when such credit is for an extended period or, as a result RELL LEER NOME LIEGE ENG POOLE RE MIE NB OS Ce ag ag D-11 of renewals, amounts to permanent financing, the basic strength of a local or regional banking system can be weakened. The use of one bank’s depositors’ funds to make loans which constitute a significant source of another bank’s capital dilutes one of the major elements of financial support for the banking system — capital funds which are wholly external to it. Finally, we are concerned about the sizable debt that Applicant will assume under this proposal. In our view, the debt servicing requirements imposed on Applicant could place an undue strain on Bank’s financial condition and thus impair its ability to continue to serve as a viable bank- ing organization in meeting the needs of its community. For the foregoing reasons, we would deny the applica- tion. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_1770%3A1. Public record. Not legal advice.