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time some of them had been standing. Had the report of August 1, 1887, reported to the comptroller the overdrafts actually standing on that day on the books of the bank, the report would have shown an actual increase, directly in the face of the comptroller's letter, of over $5,000 in the overdrafts carried by the bank. How were these overdrafts reported to the comptroller? The entry was that the overdrafts on that day carried by the bank were $2,948.08. The May report has stated $7,810.23 as the overdrafts then being carried. The comptroller's letter was then received. Another report is demanded; and while the books show an increase meanwhile in the actual overdrafts carried by the bank of $5,404.13, the report of August 1st, when compared with the report of May, (preceding the letter,) reports, as having occurred, a decrease in overdrafts of the bank of $4,862.15.-an actual increase of $5,404.13; a reported decrease of $4,862.15.
Coming back to the question I was considering, as to the undisputed fact that over $20,000 of that which on the books of the bank was on August 1, 1887, carried as overdrafts were not entered as overdrafts by defendant in his said report to the comptroller August 1, 1887, but were by him entered into said report as loans and discounts, it is for you to say, under all the evidence, whether, when defendant made the entries in these matters in said report, he made a “false entry," within the meaning of that term as I have defined it.
Testimony was offered by defendant as affecting this manner of dealing with overdrafts, in which offer it was attempted to show that other banks had been doing and were at the time pursuing in their reports to the comptroller the same methods claimed to have been pursued by this bank; but the court refused to permit the introduction of the evidence thus offered for this purpose. The court could not permit the practice of any other bank official in this regard to be considered by the jury as justification to defendant in his action. Two wrongs never make a right. Defendant must be judged by you on this point by the application of the law to the facts proven in this case. You will not, therefore, consider, as making right any wrong entry made by hiin, any testimony with reference to what any other bank did or may have done in this matter. But the court permitted defendant to show his knowledge as to what other banks had thus done, for the purpose of possibly bearing on the question whether, by what defendant entered as to overdrafts, the defendant intended to defraud or deceive any of the parties named in the indictment; and any knowledge defendant had on this point, as to the said practice of any other bank, may thus be considered by you when you come to consider the question of defendant's intent in this matter, and no further.
Defendant testified that in obtaining the aggregate reported as loans and discounts in his reports as on August 1, 1887, and October 5, 1887, he deducted, from what would otherwise have been re. ported as loans and discounts, the sum of $45,000, which he calls a “Contingent Fund.” In so doing did he make his report truthful, or did he make the loans and discounts entry incorrect or untrue? From what source did tliis $45,000 come? What caused it to be
raised? How was it raised, and what did the bank do with it? In the order in evidence from the comptroller's office dated July 1, 1887, the bank was notified that its capital was impaired $45,000, and that the stockholders must raise and pay that amount, or the comptroller would proceed to put the bank in liquidation,--that is, would put the bank in charge of an officer to be appointed by him, close its doors, and wind up its affairs. This order was peremptory, the terms were imperative, and it demanded of the bank officials and directors an acknowledgment of its receipt, etc. Do any of you doubt that the comptroller meant what he said? Is there any question in your mind that the directors felt and knew the comptroller was in earnest in the matter? Read the letter which defendant says he wrote, and which he, with the other directors, signed and forwarded to the comptroller, and all possible doubt on this point is removed. In that letter defendant and the other directors stated that the sum of $45,000 as demanded had been "contributed and paid in to the cashier" of the bank, and reference is made in the letter to "the good work so well begun.” How was this $15,000 paid in to the cashier, as the letter informs him? A part was paid in cash, and was placed among the other cash in the bank's vaults. For the remainder, notes were given, and the discount register or record shows a regular discount by the bank of these notes, the larger part of which are shown to have presently been paid in cash. Now, can there be any doubt in the mind of any sane man that if the statement in the letter was true, and not willfully false and intentionally deceitful, as an actual fact the $45,000 demanded had been actually paid in to the cashier? And, if paid in to the cashier, does not the discount record of the bank tell a truthful tale when it shows the note part of that $45,000 was discounted by the bank just as it would have discounted any other notes? This makes the letter true, and the discount record true. A part was paid in cash. Notes were discounted for the remainder, and the cash proceeds went into the treasury of the bank, and, as stated in the letter, the $45,000 was paid to the cashier. The good work had indeed been well begun, and thereupon these discounted notes became and were the property of the bank, just as truly and fully as any other notes discounted by the bank were the bank's property, or the statements of the letter were untrue and radically false.
All this occurred before the August report was made, and there appears no dispute in the evidence concerning it; and it is shown that at the time of this August report some $30,000 of this $45,000 yet remained upon the books of the bank as paper discounted by the bank. Can there be any serious question that it should have been reported to the comptroller, and included in the loans and discounts reported, and that, when this $30,000 (of the $45,000) was subtracted from what would otherwise have been the aggregate loans and discounts, the report was thereby made untrue and incorrect?
But, again, the evidence without contradiction showed that at the time of this August report $15,000 of this $45,000 had been paid in cash by the directors, and no loan and discount paper for it was held by the bank. Why, then, was this $15,000, in addition to the $30,000,
deducted from the loans and discounts? What possible justification can be urged for deducting this cash item of $15,000 from loans and discounts for the purpose of showing the true loans and discounts? Is there a doubt in the mind of any juror that according to the testimony of defendant, corroborated by that of Cashier Harris and by the entries in the books of the bank of that period, this deduction of $15,000 was incorrectly made, and the aggregate of loans and discounts thereby obtained was incorrect and untrue?
Defendant claims, and has offered some testimony on that theory, that this money and notes (this $45,000) did not belong to the bank either in August or October, 1887, and in fact they did not belong to the bank until depreciated or objectionable paper to that extent had been charged off by the board of directors, and that this was not done until after October, 1887. But the order of the comptroller demanding that $45,000 be raised neither contained nor referred to any such condition. That amount was to be unconditionally raised, and unconditionally paid into the bank. The penalty for not so doing was the closing of the bank. The letter, in the handwriting of the defendant, and signed by him and his associate directors, and sent to the comptroller, informed the comptroller that the $45,000 had been paid into the bank. The letter neither stated nor made reference to any condi. tion such as now claimed by defendant. Was the letter thus written with intent to deceive the comptroller? There is no ground shown for such a presumption, but rather that the letter was written to inform the comptroller what it states to him, and was signed by defendant at the time when he meant and intended the statement he then signed; and he cannot successfully now urge a condition inconsistent with his letter, and which, if stated in that letter, it is but reasonable to believe would have resulted in what the comptroller threatened,—the closing of the bank doors. But the question still remains with reference to this point for the jury to determine, did defendant in what he did with. reference to the deducting of this $45,000 from loans and discounts, and entering in the report to the comptroller as correct and true the amount of loans and discounts as thus obtained,--did defendant make a false entry, within the meaning of this term as I have detined it?
I come now to the charge that in the report of August 1, 1887, defendant made a false entry with reference to the liabilities of the directors. The government contends that this entry is too small by many thousands of dollars.
The provisions of law wisely authorized the requirement that the bank shall report the liability of its directors to it. A bank rarely fails (and with reasonable certainty as to the answer I may apeal to your knowledge, and as a matter of common observation among men, that a bank is scarcely ever, if ever, wrecked) by loans to parties not members of its board of management. Hence the wisdom of the requirement that the report state the liability of directors. The bank directors must each be the owners of ten shares of stock, and there must be at least five directors. Frequently, if not ordinarily, some of the directors are larger stockholders; so that the law and the public can generally rely upon the interested directors seeing that the bank is not wrecked by appropriation, by parties out
side the board, of any large amount of the funds of the bank, although the law limits even these loans. But the danger arises when the par. ties in the board either conspire together or connive at some of their members taking large amounts of the funds of the bank for their use in speculation or investment, or the like; and so in each report there is required to be entered the liabilities of directors. In this report it is stated as “Liabilities of Directors (Individual and Firm) as Payers.”
The testimony of defendant is that on August 1, 1887, the bank was the owner of over $18,000 of paper drawn by L. D. Randall & Co.; that L. D. Randall was at that date a director in this bank, and, when this paper was discounted, was a member of the firm of L. D. Randall & Co.; but that in this report to the comptroller he did not enter as a liability of director this said amount of L. D. Randall & Co. paper, because, as he thought, L. D. Randall was not liable as payer. If he so thought at that time, he erred in judgment. You are instructed that in this respect the entry as to liabilities of directors is, according to defendant's evidence, not correct and true, and that defendant should have entered that amount under the heading of “Liabilities of Directors.” As to whether it is, as made by defendant, a “false entry,” within the meaning of the term as I have defined it, you must decide under all the facts proven. Here, also, you may pertinently consider what, if any, influence upon the method which defendant practiced as to the Randall & Co. paper in report of August 1, 1887, the letter of the comptroller had.
In the last report in evidence preceding this letter from the comptroller there had been reported, as liabilities of directors as payers, the aggregate of $53,867.08. This was of date of May 13, 1887. The comptroller's letter, as I have stated, is July 1, 1887. In this letter the comptroller calls attention, by special reference, to the fact that certain loans he names exceeded the limit prescribed by law, and among them the comptroller named the loans to L. D. Randall of $19,049. (At this time L. D. Randall was a director in the bank.) The comptroller notifies defendant and the other directors of the bank as follows: “Attention is again called to the unlawful use of the bank's funds by its officers and directors;" and he adds: “I must ask that these loans be reduced immediately to within the limit,” etc. Within about a month after the receipt of this letter another report was demanded by the comptroller. At the time of this last called for report of August 1, 1887, the bank was the holder of paper drawn by L. D. Randall & Co. for the amount of $18,000, and of L. D. Randall of about $5,000, in all exceeding the sum of $23,000, as paper on which said L. D. Randall, then a director, was liable as payer. The testimony of the defendant is to the effect that he did not enter this paper on which L. D. Randall was liable as a payer in the liabilities of directors as the same is entered in the report of August 1, 1887, and as of October 5,1887. In this respect the entry as to liabilities of directors is in each of said reports incorrect and untrue; and it is for the jury to say, from all the facts and circumstances proven, whether defendant made, with reference thereto, in said reports, a "false entry," within the meaning of said term as I have defined it to them in the preceding in. structions. The defendant was permitted to state the reason why, as he stated, he did not enter the said L. D. Randall & Co. paper among liabilities of directors, etc. The court permitted this reason to be given, that the jury might consider it as bearing on the question of intent; whether defendant had in his action any intent to deceive or defraud the persons named in the indictment, if you find that he made a false entry in this particular.
As to one other piece of paper, purporting to be a draft made by the Iowa City Gaslight Company by J. K. Graves, president, in favor of J. K. Graves, and held by the bank for about $5,700, defendant testifies that he did not enter this paper among liabilities of di. rectors. Evidence has been admitted, namely, the sworn testi. mony of the defendant, tending to show that at the time this draft was drawn, or the orignal draft of the same import, of which this was one of the renewals, defendant knew that this paper, drawn by said J. K. Graves, who was then a director of the bank and a brother of defendant, and nominally drawn by him as president of the gas company, was in fact the paper of J. K. Graves, and so known to the defendant. The government contends that this draft was but a ruse or device whereby the said J. K. Graves was to be permitted to further increase his paper in the bank, under attempted color of a draft by said gas company. If the jury find from the facts proven that, at the time this paper was drawn and taken by the bank, said J. K. Graves had no authority to sign said paper with the name of said gas company as by him as its said president, and that the paper wils in fact said J. K. Graves' paper and discounted for J. K. Graves' personal benefit, and that all these facts were at the time fully known to said defendant, and, so knowing, said defendant intention. ally did not enter the same among liabilities of directors, the jury will determine from all the facts proven whether said defendant made a false entry in said report of liabilities of directors with reference to this matter, within the meaning of the term "false entry" as heretofore defined to them.
I have considered in some detail the items entering into the report of August 1, 1887. Many of the same items, and much of the same method of making the report, enter into the report of October 5, 1887. I shall not attempt to consider the several items of the October report. The jury may take the method of treatment I have given as to the August report, and themselves apply the same substantial method so far as properly applicable to the October report; and when they have considered all the evidence relating to the charges of false entries in said October report, and applying thereto the law as I have herein given it, the jury will determine whether the defendant made any "false entry" (as I have heretofore defined it) in said October report, with regard to loans and discounts or overdrafts or liabilities of directors, as stated in the several counts relating thereto.
If the jury do not find, in any one of the two reports above described, that defendant made any false entry charged in the indictment as the same is submitted to you, and as the term "false entry” has been hereinbefore described and defined, you will proceed no further in your investigations; for the making of such false entry therein is, as heretofore stated, essential to the finding of defendant's guilt. If