805

Loans to Uncreditworthy Borrowers and/or Insufficiently Collateralized

Improper lending is probably the most obvious type of misapplication, but it should be noted that a badly made loan in and of itself might be mere maladministration as opposed to criminal misapplication. See United States v. Giragosian, 349 F.2d 166 (1st Cir. 1965); United States v. Williams, 478 F.2d at 373; Hernandez, supra at 1364; United States v. King, 484 F.2d 924 (10th Cir. 1973), cert. denied, 416 U.S. 904 (1974). It can occur by either granting an unsecured loan to a person who is not financially able to repay or by knowingly granting a loan on inadequate or valueless collateral. See Mulloney v. United States, 79 F.2d 566 (1st Cir. 1935), cert. denied, 296 U.S. 658 (1936). The bank officer or employee often has a financial interest in this type of loan. See Hargreaves v. United States, 75 F.2d 68 (9th Cir. 1935), cert. denied, 295 U.S. 759 (1935). The bad loan can be a misapplication, however, without any showing that the bank officer personally benefited from the transaction, if it can be shown that the officer acted in reckless disregard of the bank's interest. See Logsdon v. United States, 253 F.2d 12 (6th Cir. 1958). [cited in USAM 9-40.000]