Note: Irvin Eddington ("Defendant"), a Vice President of People's Community State Bank, had lending authority up to USD 10,000 for unsecured loans and USD 50,000 for secured loans. Under bank procedures, he was to forward an LC that was to be issued with supporting documents to the bank's cashier to be recorded in a log of all outstanding LCs. Requests for LCs over USD 50,000 were to be presented to the bank's Board of Directors at their monthly meeting for discussion and approval, at which time the Board would also review the log of outstanding LCs.

Defendant allegedly issued irrevocable LCs to his personal associates, issued false monthly reports to the cashier, failed to reveal unreported LCs at the monthly meetings when the Board asked about anything that may not have been included on the log, and issued irrevocable LCs that were in excess of his lending authority.

When charged with embezzlement and bank fraud under 18 U.S.C. § 1344. Defendant moved to dismiss the count of bank fraud for insufficiency and failure to state an offense. The United States District Court for the Eastern District of Missouri, Southeastern Division, Blanton, U.S. Magistrate, recommended denial of Defendant's motion to dismiss the count of bank fraud.

Defendant alleged that the indictment for Bank Fraud did not allege essential facts constituting an offense under 18 U.S.C.§ 1344 because there were no allegations that he obtained any property owned, controlled or operated by the bank, because there was no allegation of express misrepresentations to the bank, and because he received no bribe or compensation for the conduct alleged. Defendant further contended that the facts alleged in count two of the indictment were insufficient to advise him of the nature of accusations against him in violation of the Fifth, Sixth, and Fourteenth Amendments of the United States Constitution.

The Magistrate noted that the language of the indictment alleged suppression of the truth with the intent to deceive and active concealment, sufficient to support Count Two under 18 U.S.C.§ 1344. The Magistrate opined that it was not necessary that the Defendant obtain credit for himself or receive some payment for his actions; merely obtaining the unauthorized irrevocable letters of credit was enough for violation of the statute. Because the allegations were sufficiently specific to support the indictment, there was also no violation of Defendant's Fifth, Sixth, and Fourteenth Amendment rights.

In response to Defendant's timely filing of an objection to the Magistrate's report and recommendation that the indictment of bank fraud was sufficiently supported by the alleged facts, the court reviewed de novo his findings and conclusions. The United States District Court for the Eastern District of Missouri, Southeastern Division, Jackson, J., adopted the Magistrate's Report.

The Judge ruled that the indictment was facially valid as it included sufficient facts to meet the requirements of bank fraud and to put the Defendant on notice of the unlawful activity alleged against him. The Judge concurred with the Magistrate's findings that Defendant was clearly charged with concealing material information from the Board regarding the irrevocable LCs he issued to his associates. The Judge reiterated that concealment of information about the LCs in violation of a duty to disclose without a showing of the accrual of any personal gain by the defendant was sufficient to support an indictment.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.